The Federal Reserve is widely expected to increase the short-term interest rates it controls by 25 basis points. There have been a string of statements to that effect by Fed Governors and Presidents. And now Fed Vice Chairman Fischer and Chair Janet Yellen have added their voices to the chorus.
Most notable has been the change of heart by Governor Lael Brainard. She was a prominent dove prior to the election. Now she has turned hawk, in what may be one of the greatest conversions since that of St. Paul on the road to Damascus.

If the Fed does not raise rates at the March FOMC meeting, it will surprise financial markets. And it would damage the Fed’s remaining credibility. So, we can assume a March rate hike is baked in. The interesting question is how many increases in the Fed’s administered interest rates will there be this year. Fed officials are signaling two more, for a total of three in 2017. For reasons I will explain, two more rate increases may not be enough and yet may be too many.