MNI: PINCH UPDATE: In line with the equity market....>

MNI: PINCH UPDATE: In line with the equity market sell-off , market-implied

probabilities of policy rate hikes have fallen in the US, Eurozone and UK. 

- Although December is still a live date for the FOMC, PINCH attributes just a

55.9% probability of a fed funds hike. We have observed substantial volatility

in external estimates with the Dec probability moving from 80% to 60% in just a

few days, whereas PINCH has been somewhat more stable in the 55-65% bucket.

Subjectively, December still feels like a go meeting, but this will start to

look in doubt if the equity sell-off continues. 

- No significant new policy developments were announced at last week's ECB

meeting. December is still almost a shoe-in for ending the APP, while Draghi

stated that rates will not rise until at least summer 2019. Concomitantly, the

PINCH estimate of a 10bps depo rate hike by the December 2019 meeting has fallen

to 66.5% from 77.8% the previous week.

- The biggest probability shift has been observed in the UK where a December

2019 hike is now little better than a 50:50 proposition.