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Report | All talk, no action … Yet.


​Last week we saw much more talk than action.

First, key members of the Fed gave pivotal speeches. New York Fed President William C. Dudley said, "I think the case for monetary policy tightening has become a lot more compelling." He also said rates could be tightened "fairly soon." The markets jumped all over these comments, and the probability of a March rate hike quickly rose from about 30 to 80 percent.

We now anticipate an increase of 25 basis points at the March 15 Fed meeting.

On Friday, Fed Chair Janet Yellen emphasized, "The process of scaling back accommodation likely will not be as slow as it was in 2015 and 2016." Although the Fed remains data-dependent, it wants to get out ahead of inflation. In addition, the Fed almost certainly believes that it has achieved its dual mandate: full employment (an unemployment rate in the 4.5 percent to 5 percent range) and price stability (2 percent inflation).

It looks almost certain that there will be two rate hikes in 2017, and the potential of three hikes is increasing.

Learn more in our complete economic insight report for March 7, 2017.

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