The officials appear to have plotted a course to raise rates a few times a year with expectations of reaching the so-called<br />neutral rate — at which monetary policy is neither stimulating nor slowing the economy — near the end of 2019.<br />At the start of 2016, Fed officials were envisioning raising rates four times over the course of the year,<br />but bond market prices suggested investors weren’t buying it and thought only one or two rate increases were on the way.<br />“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,<br />and a favorable shift in the balance of risks at home and abroad.”<br />Making the comments all the more notable: Ms. Brainard was perhaps the Fed’s most vocal advocate<br />of caution on rate increases just a year ago, arguing that geopolitical risks loomed large.<br />Fed officials seem to believe that the United States economy is nearing its full economic potential,<br />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.<br />In both their tone and actions, Fed officials are displaying greater confidence<br />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.<br />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.<br />Would a new soft patch in the economic data, a new bout of market turbulence or a new crisis lead Chairwoman Yellen<br />and her colleagues to again retreat to the wait-and-see school of interest-rate increases?
