Traders see low Fed 2017 rate hike probability

Following the March interest rate hike, the Fed officials pointed two more hikes this year. However, looking at the current market scenario, what is the Fed 2017 rate hike probability?

21 April, AtoZForex  The US Federal Reserve forecasted two more interest rate hikes this year after a recent hike in March. However, most of the market watchers are less probable about the remaining two rate hikes. Considering the current trading scenario in the Fed funds futures market, traders do not see any sign that the Fed will be able to go for two more rate hikes that officials have pointed are on the way. Do the traders see low Fed 2017 rate hike probability?

What is Fed 2017 rate hike probability?

According to the market indications, there was 57.3% probability for a short-term rate hike in June. On the other hand, the chance for the interest rate move in December was only 41.1%. There was a rise in June probability because of the outstanding performance in the stock market with 0.4% growth in the leading economic indicators barometer.

The managing director of the International Monetary Fund (IMF), Christine Lagarde, stated that the US central bank will have to be careful moving forward considering the current market scenario. Ms. Lagarde has commented:

“If it moves too fast, that’s where we might have risk because capital flows will move back from emerging markets into the US market, and that could precipitate some disorderly adjustments in those other countries.

Let’s hope it proceeds in a smooth, well- communicated and orderly manner, as fact-based as possible, as has been the case so far.”

Will the US economy slow down?

However, the investors were more comfortable in the past couple of months with the Fed’s rate hike forecast despite their crisis-era low. The US central bank was able to raise the rates for the first time in December 2015 after a long gap since mid-2006. Furthermore, we saw only one rate hike last year and that was also after a year period. Recently after increasing the rates in March, the Fed officials expect two more hikes this year. These expectations were made because of the higher hopes of growth in 2017. Also, this year’s projection came considering that inflation and employment rate progressing toward the central bank’s goals.

Since the last FOMC meeting, the nonfarm payrolls fell for the first time last month after January 2010. However, this is considered to be a key inflation indicator and it also missed Wall Street expectations. Moreover, now the Atlanta Fed expects the economy to grow by 0.5% for the first quarter.

A market strategist at Prudential Financial, Quincy Krosby, stated that the first quarter data suggest a slowing down in the economy. Additionally, Mr. Krosby was worried as the market was losing momentum and considered this to be fearful.

Think we missed something? Let us know in the comments section below.

    Share Your Opinion, Write a Comment