Market focus shifts to pace of Fed rate hikes
Back in December when the Federal Reserve raised interest rates for the only time of 2016, it hinted at three coming rate hikes this year, assuming the economy kept getting better, job growth remained steady and inflation continued to tick higher.
Well, the stream of incoming data has come in strong, and that has Wall Street pros worried that the Janet Yellen-led Fed might up their interest rate hike count for 2017 when it concludes its March meeting on Wednesday.
After another strong jobs report Friday, when February job gains came in at 235,000 (better than estimates), Wall Street began to flash concern that more hikes than forecast are coming.
“A March hike is a done deal,” Luke Bartholomew, a money manager at Aberdeen Asset Management, told USA TODAY via email. “The challenge for the Fed now is to ensure that the market doesn’t start extrapolating a much more rapid series of hikes. Investors are comfortable with three hikes this year but any suggestion of four will probably cause a wobble.”
Four hikes can’t be ruled out now, given the strong incoming data, notes Bill Stone, chief investment strategist at PNC. “The discussion,” he wrote in his weekly note, will turn to the “possibility of four planned hikes in 2017.” If the Fed doesn’t lay out the case for four hikes in its post-meeting statement, investors will seek clues from Yellen in her post-meeting press conference and the Fed’s new rate-hike projections.