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 That was exactly what Fed policymakers had feared would happen after
the central bank published fresh forecasts on interest rates that
appeared to map out a more aggressive cycle of rate hikes than
previously expected, minutes of the meeting released Wednesday
showed.
Dealers who changed their expectations said they did so because of
forecasts, and "several pointed to comments made by (Fed) Chair
(Janet Yellen) during her press conference," according to the poll,
which asked dealers about their rate hike expectations both before
and after the Fed's March 18-19 meeting.
At the policy-setting meeting, central bank officials made a widely
expected reduction in their bond-buying stimulus and decided to
jettison a set of numerical guideposts they were using to help the
public anticipate when they would finally raise rates.
The Fed said the change in its rate hike guidance did not point to a
shift in policy intentions, but new rate forecasts from the current
16 Fed policymakers suggested the federal funds rate would end 2016
at 2.25 percent, a half percentage point above Fed officials'
projections in December.
Adding to the perception of a slightly more hawkish Fed, the Fed
said it would wait a "considerable time" following the end of its
bond-buying program before finally raising interest rates, a period
of time that Yellen in her press conference suggested could be
"around six months."
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As of March 24, dealers saw a 29 percent chance of a first rate hike
in the first half of 2015, up from 24 percent before the March
meeting, the poll showed.
Both before and after polls showed dealers attached a 30 percent
probability to a rate rise in the second half.
Fed officials have since gone to great pains to point out any rate
hike decisions will depend on the state of the economy.
"It could be six, it could be 16 months," Chicago Fed President
Charles Evans told reporters on the sidelines of a Levy Economics
Institute forum on Wednesday.
(Editing by Meredith Mazzilli)
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