Hawkish statements from several prominent Fed officials as well as increased optimism for economic growth are pointing to a strong possibility for a March interest rate hike.
Probability that the Federal Open Market Committee will approve an increase at its March 14-15 meeting zoomed to 69 percent Wednesday morning, about double what it was the day before.
Just last week, the market was pricing in less than a 1 in 5 chance that the FOMC would move.
The expectations shift comes amid a flurry of Fed-speak. New York Fed President Bill Dudley, Philadelphia’s Patrick Harker and Robert Kaplan of Dallas each made statements Tuesday indicating that a hike was looming.
On top of that, economic data released Wednesday morning showed that the economy is just shy of the Fed’s 2 percent inflation target. The Personal Consumption Expenditures index — thought to be Chair Janet Yellen’s preferred inflation gauge — rose 0.4 percent in January, boosting the annualized gain to 1.9 percent and near the Fed’s target of 2 percent.
Meanwhile, economic growth appears to be accelerating a faster-than-expected pace.
The New York Fed’s GDP tracker most recently pointed to fourth-quarter GDP growth of 3.1 percent, a sharp rise from the 1.9 percent indicated at the beginning of 2017. The Atlanta Fed’s forecast is a bit less enthusiastic at 2.5 percent, but it also has been on the rise over the past few weeks.
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