I was watching the Asia First programme on CNA this morning when the presenter talked about CME's FedWatch Tool [here].As explained on the website, the FedWatch Tool calculates unconditional probabilities of Federal Open Market Committee (FOMC) meeting outcomes to generate a binary probability tree. The probabilities of possible Fed Funds target rates are based on Fed Fund futures contract prices assuming that the rate hike is 0.25% (25 basis points) and that the Fed Funds Effective Rate (FFER) will react by a like amount. (For more information on the methodology, click here.) CME FedWatch Tool.
What interested me was that based on the data at time of writing, the market is pricing in a 96.8% probability that the U.S. Fed will hike 75 bps - yes, 75 basis points, not 50 anymore - during tomorrow's FOMC meeting. Figuratively, it is no longer about the U.S. Fed slamming the brakes...