Fed signals an acceleration in the pace of tightening

Last week Fed officials acted on a clearly preconceived plan to prepare markets for another interest rate hike at the upcoming FOMC meeting, which finishes on Wednesday 15th March. Buoyed by the post-election improvement in the survey evidence and perhaps a bit more concerned by the recent pick-up in inflation, the FOMC apparently believes that it need not wait for more clarity on tax reform. Our view is still that the Fed will raise interest rates four times this year, taking the fed funds rate to between 1.50% and 1.75% by end-2017.