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Yellen States Fed Rates to Increase

Janet Yellen, Chair of the Board of Governors Federal Reserve System

Janet Yellen,
Chair of the Board of Governors
Federal Reserve System

In her last public remarks before the Federal Reserve’s March 14 -15 meeting, Federal Reserve Chair Janet Yellen announced plans to increase the federal fund rate.

"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 at a speech in Chicago, according to prepared remarks that can be found at Business Insider.

Whether these increases will come at the March meeting or later in the year remains to be seen, however, Credit Suisse finds it probable, according to a Yahoo! Finance report, James Sweeney, managing director of Credit Suisse said on Friday:

“In response to these developments the market implied probability of a March hike has risen from 25 percent on February 1st to over 75 percent now. This market action could be self-fulfilling, because it undercuts claims that the Fed needs to use a meeting to ‘prepare the market’ for an upcoming hike.”

Still, not all economists predict a hike after March 15. Chief Economist at Stifel Fixed Income, Lindsey Piegza, Ph.D. discussed the warnings from the Federal Reserve and the possibility of expectations not being met.

"...the market has been disappointed before after buying into individual Fed members’ comments," said Dr. Piegza. "Furthermore, unless the Committee opts to abandon their data-dependent stance in exchange for one of fiscal policy anticipation, the Fed will likely continue to exercise patience, pulling the rug out from under the market’s certain expectation of a third rate hike come the 15th."

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