With September in the books, investors are placing bets on the odds of a October or December rate hike. Prior to today’s release, the market gave less than a 10% likelihood of an October rate hike and 35% for December.
In short, the market sees the odds of a 2015 liftoff as less than 50/50, casting doubt on the sincerity of the convictions of Fed officials to raise rates by year’s end.
The currency markets seem to agree. The dollar has slid for days going ahead of the 10/8 Minutes release as that market appears to be anticipating a hike-free 2015
According to Prattle’s algorithmic scoring of the central bank’s mood, Fed sentiment–that climbed ahead of the meeting–has leveled off since mid-September. Today’s minutes yielded a neutral to slightly hawkish residual score (which is a score produced by comparing this release to only previous minutes’ scores) of 0.196. That score fits perfectly in line with the leveling off we have seen in recent weeks and suggests something of a holding pattern for Fed officials who are still anxious to raise rates.
Bottom line: even given the fairly neutral minutes today, we have yet to see sentiment declines, indicating that the Fed has yet to take a turn for the dovish. We see this as a clear sign that October is off the table, but a December rate hike is still a reasonable possibility–especially if sentiment resumes its climb.