Fed: Downgrading the likelihood of a March hike - BBH

The market may have gotten slightly ahead of itself in downgrading the likelihood of a March Fed hike because of the recent volatility in the stock market, according to analysts at BBH. 

Key Quotes

“Equity prices seemed stretched, and more than one Fed official has commented on it.  Officials may have preferred a more stable adjustment, but they are unlikely to protest the direction.  And that direction, at the end of the day, was not so large as the media's emphasis on the point moves instead of percentages.  That is to say, the impact on sentiment and spending and investing behavior is likely to be minimal and short-lived.”

“According to Bloomberg's calculation, the market had priced in a 99% chance of a hike into the March Fed funds futures contract at the end of January.  Following the employment data and the first leg down in equities, there was still nearly a 93% chance still priced in at the end of last week.  That fell to about 80% yesterday before firming back toward 87% into the close as equities melted up.”