Fed: Odds of a rate hike rising - BBH

The Federal Reserve may not be on a coordinated campaign to convince the markets of a pending rate hike as it did so effectively in late February and early March, but investors are getting the message, explains the analysis team at BBH.  

Key Quotes

“The Bloomberg calculation of the odds of a rate hike before the end of the year has risen to 70% from 53% before last week's FOMC meeting and 33.5% at the end of last month. The CME puts the odds at 81%, up from 37% a month ago.”  

“Yellen did not break new ground yesterday.  She reaffirmed the impression at her recent press conference that the uncertainties about inflation do not stand in the way of another hike this year.  Remember that the dot plots showed that 11 of the 16 Fed officials thought a December hike would be appropriate, up from eight in June.”  

“Yellen acknowledged three areas of uncertainty about inflation where she and the Fed could be wrong.  But rather than reading this as self-doubt, as some in the media have, we suspect the market got it right.  She was sharing an intellectual honesty that is often most noticed in its absence.  Some of the Fed's critics accuse it of hubris and excessive dovishness.  That does not seem to be the case presently, whatever the case may have been previously.”