The Federal
Reserve is expected to raise interest rates for the second time in three
months on Wednesday, encouraged by strong monthly job gains and
confidence that inflation is finally rising to its target.
A
rate hike at the conclusion of the Fed's latest two-day policy meeting
is already baked into bond yields and financial markets overall, with
investors putting the likelihood of such a move at 95 percent, according
to CME Group's FedWatch programme.
Attention is turning instead to whether the U.S. central bank will signal an even faster pace of monetary tightening this year than the current three rate hikes that it projected at the December policy meeting.
A rate increase on Wednesday would push the Fed's target overnight lending rate to a range of between 0.75 percent and 1.00 percent, still low but approaching the range that the central bank has typically operated within.
The Fed is scheduled to release its latest policy statement along with updated economic forecasts at 2 p.m. EDT (1800 GMT). Fed Chair Janet Yellen is due to hold a press conference half an hour later.
The U.S. economy has flexed its muscle in recent months, with job gains above 230,000 in both February and January. Consumer confidence also has risen and inflation has been firming.
Fed policymakers are also pleased by an improving global economic outlook, with euro zone growth edging up and China looking more stable than a year ago. Over the past two years Fed policymakers had worried that a weak global economy would limit U.S. growth and hold down inflation, leaving no compelling reason to raise rates.
The Fed's growing comfort with the economic outlook does not mean it will tighten monetary policy faster than planned.
Attention is turning instead to whether the U.S. central bank will signal an even faster pace of monetary tightening this year than the current three rate hikes that it projected at the December policy meeting.
A rate increase on Wednesday would push the Fed's target overnight lending rate to a range of between 0.75 percent and 1.00 percent, still low but approaching the range that the central bank has typically operated within.
The Fed is scheduled to release its latest policy statement along with updated economic forecasts at 2 p.m. EDT (1800 GMT). Fed Chair Janet Yellen is due to hold a press conference half an hour later.
The U.S. economy has flexed its muscle in recent months, with job gains above 230,000 in both February and January. Consumer confidence also has risen and inflation has been firming.
Fed policymakers are also pleased by an improving global economic outlook, with euro zone growth edging up and China looking more stable than a year ago. Over the past two years Fed policymakers had worried that a weak global economy would limit U.S. growth and hold down inflation, leaving no compelling reason to raise rates.
The Fed's growing comfort with the economic outlook does not mean it will tighten monetary policy faster than planned.
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