US Fed odds-on to hike in December

By Tim Stewart
 — 1 minute read

The victory of pro-fiscal stimulus Donald Trump has prompted markets to price in a high likelihood of an interest rate hike by the US Federal Reserve when it meets on 13-14 December.

The implied probability of a US interest rate hike for the Fed-Fund Futures market is currently sitting at 94 per cent, according to Bloomberg.

Commenting on the likelihood of a US Federal Reserve rate hike in on December 13-14, Pimco global strategic adviser Rich Clarida said the result of the US election means the minutes of the Fed's previous meeting have "gone stale".


"Not possessing ESP or a reliable crystal ball, the Federal Open Market Committee (FOMC) did not assess a scenario for a Trump victory and the associated repricing of bonds, equities and currencies – not to mention repricing of the Fed’s own interest rate lift-off path," said Mr Clarida.

"The minutes reveal a committee that had expected to hike at the meeting on December 13-14. Developments since then – especially the prospects for fiscal expansion that would reflate a fully employed US economy – could only have strengthened the case."

While central bankers in the US are odds-on to increase interest rates in December, in Australia futures markets are betting the RBA will stay 'on hold' in December.

The ASX 30 Day Interbank Cash Rate Futures December 2016 contract was pricing in a 98 per cent of 'no change' to the official cash rate at the time of writing.

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US Fed odds-on to hike in December
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