With 7 more days to go to the last FOMC meeting of 2017, most analysts see a rate hike as a certainty. Are there other ways to look at this?
Based on probabilities at this instance, these 9 statements are equally valid:
- Rate hike on 13 December 2017 is a near certainty (90.2%).
- If Fed doesn’t hike in December, it will near certainly hike in January (88.3%).
- There is only 0.25 hike between the next two meetings; the probability of a 0.50 hike is low (11.5%).
- If Fed hikes next week, there won’t be a hike in January (11.5% probability of second hike).
- Fed will continue to hike in 2018 (positive odds).
- The odds of a hike in 2018 (after the coming one) is at best 50.5% or none.
- The coming hike could be the last one.
- Fed could hike until 1.75 – 2.00 percent (positive odds).
- The Fed could cut rates in 2018 (positive odds).
Although policy makers want to emphasise that they will continue to hike rates because the economy is good, a trader could also see the economy as not good since:
- this hike could be the last as odds of another is 50:50 and
- odds of a rate cut could not be eliminated.
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
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