Will next US rate hike happen in March or June?

It is certainly impossible to anticipate the next decisions of the Federal Reserve (Fed) but by rereading the transcript of the remarks made by its Chair Janet Yellen before the US Senate on February 14, 2017, Cyceon deduced that the Fed does envisage a rate hike.

“At our upcoming meetings, the (Federal Open Market) Committee (FOMC) will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Yellen said. It would also be the ability to anticipate Trump’s economic policy that will partly decide the Fed’s monetary policy.

As a result, a minority believes that a rate hike as of March 2017 would be premature, while a majority considers that if the financial markets continue their Trump rally in parallel with a slight increase in consumer prices (CPI) then a rate hike is likely.

According to statistics compiled by CME Group, the probability of a rate hike on March 15, 2017 is about 80% for 50-75 basis points, while there is also a 45% probability for a rate hike of 75-100 basis points on June 17, 2017.