100% agree George, I had this discussion below with @giltwenty. Probability rate staying at 2.25-2.5% is 97% today. This is not what will move the market, its the rhetoric.
Right into December, we have a >70% probability that rates stay between 2.25-2.5%, with 0% probability of a hike. If the rhetoric is hawkish the markets will discount that.
None the less, I agree, no hike!
There will certainly be a selloff if rates are raised. Interestingly when that news came out from around the 6th of march we had that rapid selloff only to be bought up again. I don't think Powell will surprise the markets here. Forecasts are for no change, but an easy play for traders out there either way. It seems we have a little sell off today as traders hedge their bets pre announcement of rates.
You're right, Bill Dudley is no longer part of the FOMC but if there is anything I learned from Larry Summers its that once a Fed member, always a Fed member.
This comment from Monday, 18th that just past.
"I think what is going to happen is we are going to have a pretty weak first quarter, and that’s going to cause the Fed to wait for even more information,” the former New York Fed President said during a Bloomberg TV interview with Scarlet Fu and Caroline Hyde.
"But if the economy picks up speed again, as I expect will happen, and inflation starts to drift higher" as Morgan Stanley predicted it will last week "then the Fed will be back in play, maybe as early as the second half of this year," Dudley said
The market is a discounting mechanism, the Fed doesn't need to raise rates, they only need to have the intent and the market will discount that. I see it unlikely that we have a hike but don't rule out a hawkish overtone. Although PPI is weak due to PMI's, the pop is commodities especially Crude Oil will cause transitory inflation at the very least! (Crude Oil YoY is = CPI YoY)
For today there is a 97% (87% for July & 79.2% for September) probability that Fed Funds remains at 2.25-2.5%.
If the Fed are hawkish today the market is not expecting it and thus a sell-off is likely!