The officials appear to have plotted a course to raise rates a few times a year with expectations of reaching the so-called
neutral rate — at which monetary policy is neither stimulating nor slowing the economy — near the end of 2019.
At the start of 2016, Fed officials were envisioning raising rates four times over the course of the year,
but bond market prices suggested investors weren’t buying it and thought only one or two rate increases were on the way.
“Recent developments suggest that the macro economy may be at a transition,” said Lael Brainard, a Fed governor, in a March 1 speech, describing a situation of “full employment within reach, signs of progress on our inflation mandate,
and a favorable shift in the balance of risks at home and abroad.”
Making the comments all the more notable: Ms. Brainard was perhaps the Fed’s most vocal advocate
of caution on rate increases just a year ago, arguing that geopolitical risks loomed large.
Fed officials seem to believe that the United States economy is nearing its full economic potential,
that the expansion is more sturdy than it was just a year ago, and that inflation is closing in on the 2 percent mark that the Fed aims for.
In both their tone and actions, Fed officials are displaying greater confidence
that they know where the economy is heading — namely that it is converging on a state of full employment and inflation near their 2 percent target.
Investors see a 60 percent chance that the Fed will raise rates three or more times this year, based on prices in futures markets Friday.
Would a new soft patch in the economic data, a new bout of market turbulence or a new crisis lead Chairwoman Yellen
and her colleagues to again retreat to the wait-and-see school of interest-rate increases?