In a research note released this morning, Goldman Sachs chief economist Jan Hatzius wrote: Superforecasting Fed Policy
“… 35% probability for a hike in June, a 35% probability for July, a 20% probability for September—our previous modal forecast—and a 10% probability for either a later hike or a cut.”
This suggests a cumulative forecast probability of 70% by the July meeting, and 90% by September.
The Fed has definitely changed expectations.
For amusement … early in my career, as a scientist at SAIC in San Diego (my undergraduate degree is in chemistry), I was invited to a sales meeting to discuss potential new contracts. A senior salesperson discussed one potential contract, and he was asked the probability of obtaining the contract. He said it was 50%.
Asked how he came up with the odds, he said: “Either we get it or we don’t.”
The Fed is more data dependent than that salesperson. A pickup in inflation and a decent jobs report will increase the odds of a June rate hike. But I suspect that sales guy would put the odds at 50%: Either they hike or they don’t!