How long will The Fed continue to raise its target rate and continue to unwind its balance sheet? According to bond traders, there is likely to be one rate hike in December and one in 2019.

The odds of a Fed rate hike in December is running about 80%.


(Bloomberg) — If Federal Reserve Chairman Jerome Powell meant to walk back a misstatement from last month, he may not have meant to walk it quite this far. The U.S. rates market is now hinting at a halt in tightening in 2019 and some strategists believe that traders are ill-positioned for increases.

At one point on Wednesday traders were pricing in slightly less than a quarter point hike in 2019 after Powell said in a speech that the fed funds rate was “just below” neutral. That contrasts with his suggestion on Oct. 3 that rates were probably a “long way” from that point.

With nothing currently priced for 2020, markets are now effectively envisaging a one-and-done move next year, following an anticipated hike next month. That looks like too much of a pullback for some observers, who see the Fed revising its projections lower in December to a median of two hikes for 2019, from the current three.


“I promise to keep changing my mind unlike my predecessors.” – “One And Done” Powell