Rate Expectations: Not So Fast, Fed

Wall Street is increasingly skeptical about the pace of Federal Reserve interest-rate increases this year, the latest blow to the central bank’s yearslong efforts to unwind its easy-money policies and return the economy to a normal footing.

At the start of 2016, the market viewed the Fed as likely to deliver another interest-rate increase at its March meeting, following December’s first rise in the federal-funds rate since 2006. Fed officials have pointed to as many as four rate increases this year, while saying they would closely survey economic data before making any decision.

But in recent weeks, Credit Suisse Group AG, Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. all have pushed back their forecasts for the next rate increase to June, while market-based measures of interest-rate expectations have fallen significantly.

“We have entered the new year with weak momentum in growth, but the strengthening dollar and the decline in asset prices both portend weakness going forward,” said Joel Prakken, senior managing director at research firm Macroeconomic Advisers LLC.

wsj.com

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