Fed policymakers raise March interest rate hike odds

Number of Federal Reserve Presidents raises March interest rate hike odds. Are the Fed officials on the same page? Here are some highlights on their comments.

1 March, AtoZForex – After US President’s Trump Congress speech last night, now the market eyes lie on the Fed March 14-15 meeting for the rate hike. The market watchers are eagerly waiting for the March interest rate hike odds. A number of Fed officials’ comments jolted the market on Tuesday. The comments sparked a spell of selling in the bond market leading the two-year Treasury yield jump to its highest level since December.

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Are the Fed officials on the same page?

New York Fed President William Dudley said on Tuesday that the case for tightening monetary policy had risen in recent months. According to him, it has become a lot more compelling since the election of US President and a Republican-controlled Congress. Dudley, who is a voting member of FOMC and a close ally of Fed Chair Janet Yellen, said:

“We have seen a very large rise in household and business confidence and very buoyant financial markets since the November election, and we have the expectation that fiscal policy will probably move in a more stimulative direction.”

His remarks followed comments from John Williams, San Francisco Fed President. Williams said that he expects a rate hike will receive serious consideration at the next Fed meeting. He added:

“With the economy at full employment, inflation moving higher, and upside risks from potential tax cuts waiting in the wings, I personally don’t see any need to delay raising rates.”

Another Fed official, Patrick Harker, Philadelphia Fed President also speaking on Tuesday before Trump’s speech that he favors three rate hikes in 2017.  He was comfortable with the hikes if the economy remains on track. On February 21, 2017, he said that Federal Open Market Committee (FOMC) should be open to hike rates in March.

A counterpoint came Tuesday evening from James Bullard, St. Louis Fed President, who feels only a single rate hike is needed this year. Moreover, he argued that there is no need to expect the possible impact of tax and spending plans that have still not materialized and may take months to pass Congress. The Federal Reserve presidents have been lining up to make clear that March is a "live meeting," and the rate hike will be on the table.

What are the March interest rate hike odds?

Even though most Fed watchers have been forecasting a June rate hike, the strong inflation and retail sales data and hawkish comments from Janet Yellen raised the possibility for March and May in recent weeks. The possibility got even higher as more Federal Reserve presidents commented about the March hike.

Inflation data scheduled for Wednesday could be a key factor for the March hike. The inflation that has remained below a Fed target could now show an increase of 2% for the first time in nearly five years. The rising inflation has raised expectations for the rate hike this year. The other data that can play a major role for a March hike is the employment report of February. If the report shows consistent job growth, then it can be a key for the Fed to make the decision.

More clues are expected to come further today when Fed Governor Lael Brainard speaks at 6 p.m. ET in Boston. Brainard is also close to Fed Chair Janet Yellen. Moreover, Yellen will update her views on the economy in Chicago on Friday.

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