Market round-up: What’s the probability of a rate hike now?

The probability of the Fed Funds rate being raised has dropped, as far as the 2 November meeting goes


The probability of a US Federal Reserve rate hike in the 14 December meeting has remained more or less the same. Similarly, there have been marginal changes in the probability of rate hikes in meetings the next year. Photo: Bloomberg
The probability of a US Federal Reserve rate hike in the 14 December meeting has remained more or less the same. Similarly, there have been marginal changes in the probability of rate hikes in meetings the next year. Photo: Bloomberg

What are the odds of a rate hike by the US Federal Reserve after the Federal Open Market Committee (FOMC) statement on Wednesday?

CME Group’s Fed Watch tool calculates the market’s views on the likely changes of the Fed’s policy rate at future FOMC meetings, based on CME Group 30-day Fed Funds futures prices.

The chart shows that the probability of the Fed Funds rate being raised has dropped, as far as the 2 November meeting goes.

Notice that the probability of a hike in the 14 December meeting has remained more or less the same. Similarly, there have been marginal changes in the probability of rate hikes in meetings the next year.

Asia sentiment hits five-quarter high

Sentiment at Asian companies edged up to its highest level in five quarters in July-September, boosted by signs that China’s economy is stabilizing and as concerns about Britain’s move to exit the European Union recede, a Thomson Reuters/INSEAD survey showed, reports Reuters.

But businesses cited the policy uncertainty from a potential victory for US Republican presidential candidate Donald Trump, as well as energy prices as key risks. The Thomson Reuters/INSEAD Asian Business Sentiment Index, representing the six-month outlook at 118 firms, was 68 in the third quarter against 67 three months prior, marking the third consecutive quarterly gain from a four-year low in December.

A reading over 50 indicates a positive view.

As wheat prices drop, MSPs come to the rescue

For a change, government controls over the Indian wheat market are coming in handy for local farmers. High import duties, minimum support prices (MSPs) and procurements from Food Corporation of India meant that local wheat prices are bucking the global downtrend in wheat prices, at least till now. According to JM Financial Institutional Securities Ltd, local prices respond gradually to international rate changes. But they never fully reflect the global rates due to local interventions. As a result, if wheat production rises this year as per government target and the crop does not see weather damages, farm incomes should be less vulnerable to global shocks and should aid rural recovery, the broking firm says. “In our view, domestic prices of wheat, and hence farm income, are relatively less vulnerable to international price shocks and may come under pressure, only if farm yields drop significantly due to unseasonal rains as witnessed in FY14–15,” adds JM Financial.

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