When last week began, financial markets were predicting just a 30% chance that the Federal Reserve would raise interest rates this month. By the end of the week, after a series of comments from Fed Chair Janet Yellen and other officials, that estimation shot up to 80%.
In a series of interviews, various Fed officials made comments that shifted the market from expecting two rate hikes this year to planning for three or more, according to a Reuters report.
“It was pretty extreme in that they left little doubt,” David Stockton, senior fellow at the Peterson Institute for International Research and former Fed chief economist, told Reuters. “Moving now gives them more optionality for three or even four rate hikes this year.”
And in a speech Friday, Yellen seemed to warn that a rate hike was coming sooner rather than later.
“We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect,” she said. “Indeed, at our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.”