Fed Now Expects Three Rate Hikes In 2017

While the 25 bps rate hike was a given, the question on everyone's mind was how many rate hikes does the Fed envision for 2017. The answer, somewhat surprisingly, is three, an increase of one compared to the September meeting.

This is median assessment of appropriate pace of policy according to the dots:

• 2016 0.625% (range 0.625% to 0.625%); prior 0.625%
• 2017 1.375% (range 0.875% to 2.125%); prior 1.125%
• 2018 2.125% (range 0.875% to 3.375%); prior 1.875%
• 2019 2.875% (range 0.875% to 3.875%); prior 2.625%

For the longer run, the Fed now expects a 3% Fed Funds rate, (range 2.500% to 3.750%); up from the prior 2.875%.

A comparison of the dot plots:

(Click on image to enlarge)

Furthermore, according to the FF market, the market is now fully pricing rate hikes in both August and December of 2017.