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Jason Tuvia

The market suddenly doubts the Fed will raise rates twice more this year


A recent string of less-than-stellar economic news has injected some uncertainty into whether the Fed will deliver a steady diet of rate increases ahead.

In fact, current trading in the fed funds futures market indicates that the U.S. central bank will not be able to enact the two additional rate hikes that officials have indicated are on the way this year.

"Market pricing of future Fed rate hikes has declined in the wake of weaker GDP and inflation data, signals of an earlier Fed balance sheet runoff and reduced optimism on fiscal easing," Jan Hatzius, chief economist at Goldman Sachs, said in a note. "But markets may be underestimating three factors pointing toward continued steady hikes."

Fed Chair Janet Yellen, who has maintained a tight consensus during her time leading the FOMC, likely will remain focused on inflation pressures and the jobless numbers.

In fact, low GDP numbers haven't bothered the Yellen Fed very much. The December 2015 hike came amid 0.9 percent quarterly growth, while the March move came in a period also unlikely to eclipse a 1 percent gain.


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