Rate cuts by year-end
- Fed: 11 bps (94% probability of no change at the next meeting)
Rate hikes by year-end
- RBNZ: 58 bps (96% probability of no change at the next meeting)
- ECB: 56 bps (92% probability of no change at today’s decision)
- RBA: 55 bps (55% probability of rate hike at the next meeting)
- BoJ: 45 bps (53% probability of rate hike at the next meeting)
- BoC: 42 bps (95% probability of no change at the next meeting)
- BoE: 35 bps (98% probability of no change at today’s decision)
- SNB: 25 bps (75% probability of no change at the next meeting)
(You can find last week’s market pricing here.)
The repricing in interest rates expectations continues to be driven mainly by the US-Iran war. The prospects for a quick end to the war continue to fade, especially amid the latest escalations.
The TACO hope has been keeping the markets afloat but that hope is coming under strong pressure. The timeline for the end of the war continues to be extended and the Fed has put more emphasis on inflation risk.
The longer this war drags on, the worse the impact will be on the global economy. Eventually, rate hike expectations could quickly turn into aggressive rate cuts amid recessionary worries.
