The Market Forecasts A 70.4 Percent Chance Of A Fed Rate Hike Before The Election

Trump would scream if this happens.

Target Rate Probabilities for September 16 FOMC Meeting

• 3.25-3.50 Quarter-Point Rate Cut: 0.0 Percent

• 3.50-3.75 No Change: 36.9 Percent

• 3.75-400 Quarter-Point Rate Hike: 48.5 Percent

• 4.00-425 Two Quarter-Point Rates Hikes: 14.5 Percent

Two rates hikes would imply a hike at the July 29 FOMC meeting, then a second one in September.

In isolation, the odds of a July hike are 31.5 percent.

October is curious.

Target Rate Probabilities for October 28 FOMC Meeting

• 3.25-3.50 Quarter-Point Rate Cut: 0.0 Percent

• 3.50-3.75 No Change: 29.6 Percent

• 3.75-400 Quarter-Point Rate Hike: 46.2 Percent

• 4.00-425 Two Quarter-Point Rates Hikes: 21.3 Percent

• 4.25-450 Three Quarter-Point Rates Hikes: 2.9 Percent

Wow.

That’s a net 70.4 percent chance of at least one hike before the election.

Conventional Wisdom

Conventional wisdom is the Fed does not hike close to elections.

A rate hike in September would go against conventional wisdom. A second or third hike on October 28 would be a real stunner.

Nonetheless, the combined odds are 70.4 percent chance of at least one hike by October, with a reasonable chance of two hikes.

Trump’s Expectation

Trump’s expectation is for Fed Chair Kevin Warsh to deliver rate cuts.

The stage is set for fireworks.

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