After several false starts, it looks as if the US will finally have a rate rise this year. Now the presidential election is out of the way, the US Fed can act without being accused of interfering with the political process. The minutes of the US Fed’s November meeting all but confirmed a rate rise of the next meeting, stating that a rate rise should come “relatively soon”.
According to the minutes, the argument for raising the official rate “had continued to strengthen”, which is a continuation from September’s theme where the case for a rate rise had “strengthened”. From that point, markets began to gradually ratchet up the probability of a rise and currently the probability implied by futures contracts is pretty much a certainty. Commonwealth Bank said, “December looks to be a done deal”. What’s more, additional rises through 2017 are also more likely. According to ANZ, “A December hike is already priced at 100% odds, but markets are now putting decent odds on a follow-up move by June.”