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LONDON (MNI) – MNI PINCH calculate probability of rates rising in the US have moved modestly higher following newswire reports of Trump being impressed by Taylor’s interview, with markets pricing in two rate hikes by September 2018. Rates have ticked lower in the UK though as markets interpreted BoE Governor Carneys comments as marginally dovish. While in the Eurozone talk of ECB announcing lower but for longer QE has led to the curve flattening even further.
FED: MNI PINCH still see the markets pricing in no chance of a 25bp rate hike at its Nov 1 meeting, however the chance of a rate hike in December has risen to 82% from 74% since the close of business Friday. Further out, the chance of another 25bp rate hike in June 2018 is now 67.5% up from 48% while market price another full 25bp rate hike in September 2018.
ECB: In the Eurozone rumours that the ECB could extend QE for longer at lower amounts so that rates remain unchanged for longer, has reduced the probabilities of rates being hiked this year and next. MNI PINCH sees markets pricing a 6% chance of 10bp deposit rate hike in March 2018 down from 7% seen at close of business Friday, while, in September 2018 it has dropped to 18% chance of a rate hike from 24%.
BoE: Chances of a rate hike in the UK for the November MPC has ticked lower to 84.5% from 87% since the close of business Friday according to MNI PINCH calculations. The markets still continue to price in a very high chance that interest rates will be raised a second time to 0.75% by August 2018, unchanged from last week, however chance of a 2nd hike in February or May have ticked lower to 29% and 69.5% from 33.5% and 78% respectively.
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