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by Mish

"Federal Reserve Bank of Chicago President Charles Evans said the U.S. central bank could raise short-term interest rates four times this year if inflation picks up, but suggested three increases remain more plausible.

“At the moment, I don’t see the data, I don’t have the confidence” for four rate increases in 2017, he said at an event held in Madrid by the Global Interdependence Center. “If I thought that I was inclined to four rate hikes for 2017, I would presumably be seeing a much stronger lift in inflation.”

Mr. Evans said long-term inflation expectations in the U.S. are running below the central bank’s 2% target, even though short-term prices are nearing that objective.

The failure of the health-care bill that was backed by Republican House leaders adds to the uncertainties confronting the U.S. economy, Mr. Evans said. U.S. trade policy is another area of uncertainty. “We’re waiting in the U.S., as around the world, for a better articulation of exactly what the trade policies will be,” he said."

Uncertainty Nonsense

Dot Plot

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The above “Dot Plot” shows two FOMC participants believe the Fed is done hiking for the year. One participant is truly in Fantasyland, expecting the Fed to hike to the range 2.00 to 2.25. Amazing.

June Forecast

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The market thinks it is close to 50% whether or not the Fed hikes in June.

December Forecast

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At the December meeting, the market believes two more rate hikes are in the bag, with the third being just over 50% (albeit with a 17 percent chance of more).

I side with the two participants who expect no more hikes.

Mike “Mish” Shedlock