FED up!

We are a few days away before the FED announces their interest rate decision on June 14. Yet it seems that the world has basically already figured out what is going on in Chairwoman Yellen's mind, and the belief is that the FED will move the US Central bank interest rates higher.

Below we have outlined the probability of changes in three formats for illustration. A month ago (April 28, 2017) the probability of a rate hike (increase) was 66.8% or a 2 in 3 chance. Fast forward to today (June 12, 2017), the probability of a hike, as outlined by Bloomberg (blue line), is over 92%. Intuitively, the chance of no hike (orange line) is less than 8%. 

It is notable that there is a zero percent expectation of a rate cut (grey line). 

The biggest thing on our minds this week will be watching the bond market's reaction to the announcement. 

They say a picture is worth a thousand words and we think that three words will suffice - expect higher rates...

Source: VIP Wealth Solutions and Bloomberg

 

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