A Fed Hike Wouldn’t Be March Madness

The Week Ahead

January 23, 2017

The market is betting otherwise (chart), but a Fed hike two months from now seems highly likely. Remember that the central bankers will have a chance to signal their gradualist approach by passing on a rate hike on February 1st. So it wouldn’t be March Madness if, as we expect, they choose to add a quarter point at the subsequent meeting.

Having Donald Trump in the White House won’t do much to alter that path, at least not this soon into his mandate. The Fed won’t want to prejudge the direction of fiscal policy, and given some gaps between the President and Congressional Republicans, tax and spending plans will still be a work in progress.

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