Fed: Data Shows Mkt Pricing in Q2 Rate Hike?

It has been a while since I provided updated numbers for the market’s rate hike expectations and I will chalk it up to my travels! Rate expectations are always changing and a lot has happened over the past month. Its always important to keep track of them because they reflect what investors are pricing in!

Here are the latest numbers and highlights (compared to March)

Fed – One 25bp rate hike expected by Q2 2012 > Compared to Q1 rate hike before
BoE – First Rate hike expected in Jan > compared to prior forecast for 50bp rate hike in 2011
ECB – 50bp of additional tightening expected > compared to 75bp after April hike
RBA – Close to one 25bp rate hike by years end > significant upgrade from March expectations
RBNZ – One rate hike in Jan 2012 > bumped up from March
BoC – 25bp rate hike in Oct > slight downgrade in rate hike expectations

Forex: Major Changes to Rate Hike Expectations

Over the past 3 weeks, central banks around the world have made a number of comments that have affected rate hike expectations. On Jan 27th, I showed where rate hike expectations were at the time and since then a number of interesting changes have occurred.

First, the market is now pricing in a 25bp rate hike by the Fed in Dec. Last month, no rate hike was expected. Close to 70bp of tightening is now expected from the Bank of England, up from 50bp. The market went from pricing in 2 rate hikes from the Reserve Bank of New Zealand to one. The European Central Bank and the Bank of Canada are now expected to tighten by 75bp this year instead of 50bp. A lot can change in 3 weeks =)