As the markets recover from last week’s jolt triggered by allegations by Washington Post and New York Times that President Trump urged director Comey to end investigations into General Michael Flynn, who was forced to resign from the post of National Security Advisor based on a memo allegedly written by James Comey and read out to the reporters of New York Times by an anonymous source, the hike probabilities have started to strengthen but are still a bit far from pricing two more hikes.
The probability of the next hike to be in June increased from 65 percent last week to 79 percent as of latest. However, the market is pricing just 43 percent chance of the third hike in December. Some of the policymakers have also recently toned down their rhetoric towards the rate hike path. St. Louis Fed President James Bullard has recently commented that expected rate hike path is too aggressive. He also raised doubts about the June hike possibility. While Mr. Bullard is not a voting member of this year’s FOMC, his comments might be resonating the views of other policymakers too.