Sunday, February 01, 2015

Fed rate outlook for 2015 - down to 55% chance of Liftoff in October, %49 chance of second hike in January

Updating my outlook for Fed rate hikes in 2015 to put liftoff in October (hike from the current 0.0% to 0.25% range to 0.50%) with a 55% chance (down from 58% two weeks ago), and no further hikes until at least March of 2016. The odds of a second hike to 0.75% in January are only 49%, which is a virtual coin flip, but certainly not a slam dunk, down from 56% two weeks ago.

My forecast is based on the fed funds futures probabilities provided by the CMW Group FedWatch web page:

These numbers are based on fed funds futures contract prices, so they are what actual market participants are betting, not the mere whim of some economist or pundit - or even the Federal Reserve itself.

A NY Fed poll of the 22 primary dealers for Treasury debt taken in early December had September as the expected monthly FOMC meeting for liftoff with 67% chance given by survey participants and only 40% chance in June :

A Reuters poll of 82 economists two weeks ago had two-thirds with Liftoff in June:

Incidentally, the CME Group odds for liftoff in September are now only 38%, and 11% in June, compared to 39% and 12% two weeks ago.

-- Jack Krupansky

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