Methodology

RateProbability translates overnight-index market pricing into a simple, meeting-by-meeting view of expected policy settings. The outputs are market-implied (not a forecast) and are intended to be a clean summary of what tradable instruments are pricing.

What instruments we use

The core idea is to use instruments that reference the relevant overnight benchmark for each currency area (examples include SOFR/EFFR in the U.S., €STR in the euro area, and TONAR in Japan). The most commonly-used instrument family is OIS (Overnight Indexed Swaps), where the floating leg accrues the realized overnight rate over the swap period.

In practice, different markets sometimes use a mix of closely related products (OIS, futures, and other money-market instruments). Regardless of the input contract, the goal is the same: infer the market’s expected average overnight rate over future time windows and then map those expectations to the schedule of policy meetings.

From OIS quotes to a curve

OIS is often quoted as a par fixed rate for a given maturity. We turn these par quotes into a curve of discount factors and/or zero rates using standard bootstrapping logic and the market’s day-count convention.

Single-payment intuition (simplified):

DF(T) = 1 / (1 + r · τ)

where r is the par/zero rate (in decimal) and τ is year-fraction to maturity.

For short tenors that behave like a single cashflow (very short-dated OIS), the above approximation is often a good conceptual guide. For longer maturities with multiple accrual periods, we bootstrap sequentially: use earlier discount factors to solve for the next unknown discount factor.

Forward rates from the curve

Once we have discount factors (DFs), we can compute an implied forward rate between two dates (t1 → t2). In a simple setting:

Forward(t1,t2) ≈ (DF(t1)/DF(t2) − 1) / τ(t1,t2)

That forward is the market-implied average overnight rate over that window (under standard assumptions). This is the key object we use to connect market pricing to policy meeting windows.

Mapping to policy meetings

Policy decisions happen on discrete dates. Markets, however, price rates over continuous time. We bridge the two by defining meeting windows: the interval from “now” (or the last observed overnight fixing) to the next meeting, then from that meeting to the next, and so on.

For each meeting window, we use the curve to infer the expected average overnight rate in that window, then translate it into an implied “post-meeting” level. The site displays these implied levels as a path across the scheduled meetings.

Δ vs current (bps) and implied post-meeting rate

Each meeting row includes:

Implied post-meeting rate: the expected overnight/policy rate level immediately after that meeting (as implied by market pricing).
Δ vs current (bps): the cumulative change from today’s reference level into that meeting, expressed in basis points. In other words: the number of basis points difference priced-in between now and that meeting.

“Current” means a consistent policy-rate reference for the bank (for example, an effective overnight level, a target/corridor proxy, or the bank’s primary administered rate), depending on the bank.

Converting pricing into a simplified hike/cut probability

Markets can price multiple outcomes (hold / cut / hike, sometimes with mixed magnitudes). Rather than showing a full probability distribution, the site offers a simple translation using your selected step size (e.g., 25 bps):

Compute the cumulative change into each meeting (Δ).
Compute the incremental change from one meeting to the next (Δᵢ − Δᵢ₋₁).
Approximate “move probability” as: min(100%, |Δᵢ − Δᵢ₋₁| / step).

This is intentionally a simplification: it’s designed to be readable and consistent, not to perfectly reconstruct the full distribution priced by the market.

Updates, caching, and fallbacks

Data updates multiple times daily. If a live fetch fails, pages can display a last-known-good cached copy. Pages may also show an “edge cache” label when served from CDN caching.

Limitations and important notes

Not a forecast: this is market pricing, and markets can be wrong.
Meeting timing: instruments price continuous windows; meeting mapping is an approximation.
Conventions matter: day count, business-day calendars, and compounding rules vary by market.
Intra-meeting moves: policy changes can occur outside scheduled meetings in exceptional circumstances.
Step-size simplification: the “probability” is a readable summary, not a full distribution.

Intended use and disclaimer

This site is for informational and educational purposes only and does not constitute investment advice, a recommendation, or a trading signal. Always verify critical information with primary sources and your own judgment.