Interest Rate Expectations

"According to CME Fed Watch, the probability of the Fed raising interest rates by 50 basis points by September is 10 per cent, the probability of raising interest rates by 75 basis points is 90 per cent, the probability of raising interest rates by 75 basis points by November is 8.7 per cent, the probability of raising interest rates by 100bp is 80 per cent, and the probability of raising interest rates by 125bp is 11.3 per cent."

This is a news headline that is basically telling us the market is expecting a large increase in intrest rates at the next FED meeting. Basically the market has already priced in a large interest rate hike theoretically. So any smaller hike in interest rates might possibly be bullish for equities. And a largert hike might scare investors off. This is the current rationally in the current market environment.

But dont forget about the Economic Data releasing this week that will give us an idea about how high inflation risen. This might possibly change the markets expectations on the rate that the FED will increase interest rates. So you might see a market repricing that could take place after the inflation data is released this week.

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