— This is the script of CNBC's news report for China's CCTV on December 17, 2018, Monday.
The fed's rate decision made in this week is no doubt an important event to market, U.S. president Trump criticized the radical hiking move twice last week.
Saying hiking is stupid on last Tuesday and on Thursday, he said hoping the fed will not raising rate further. However, he cannot be satisfied.
Because the Federal funds rate futures show the market has a 73.2 percent chance of raising interest rates in December, and that means the fed hiking rates is a high probability event and almost a certain.
But what is notable is this probability drop compared to last week's. The market guessed it should be 75.8% on 14th and several days ago; this number was over 80%. So what's the reason for declining? The U.S stock trend behind me may solve this query. Recently, US equities dived as the market fell on concerns of the hiking moves made by the fed. DJI lost 500 points again on last Friday, with 2.02% drop, erasing all gains in this year, and DJI declined 2.5% so far, lost 1.67% compared to the same moment last year. Therefore, if the fed will increase rates the 4th time on schedule on the back of volatile market is still uncertain.
These days are a Quiet period for the fed officers, no public comments allowed, but from analysis delivered by the fed former vice chairman Fisher on last Saturday, we can get some signals. He said, if no hiking, then that means the fed is sending a very strong signal about the outlook for future interest rates, telling that the rates will be lower than they have been by historical standards and even lower than recent expectations. However, if the fed doesn't raise the rates to 5%, it will have challenge to deal with the potential future recession once US economy runs into crisis.
So, raising rates is a high probability event, Bitmap that will be published by the fed also draws market's attention, the market hopes to get some information from the fed front, seeing if the hiking moves will be mild next year. Dovish fed is a fuel factor to the market, or we will see the volatility continue running this week.