Yellen’s message this week? Rate hikes are coming

Higher interest rates are coming.

That will be the message Fed Chairwoman Janet Yellen will try to send to markets this week, economists said.

“We expect Yellen to make it clear that the first rate hike is not far off,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients.

Analysts think there is only a small chance the Fed moves at its next meeting, in July. Instead expectations have coalesced on the Fed’s September move “unless something unusual happens,” said Carl Tannenbaum, chief economist at Northern Trust.

Of course, Yellen will be more subtle than John Snow from the popular “Game of Thrones” television show, whose well-known catchphrase is “winter is coming.”

“Those looking for some type of concrete message that September is effectively a done deal will likely be disappointed,” said Michael Cloherty, head of U.S. rates strategy at RBC Capital Markets.

Yellen’s message will be nuanced, asserting that rate hikes are coming as long as the economic data over the next three months performs as expected, said Michael Hanson, U.S. economist at Bank of America, Merrill Lynch. The Fed continues to believe the slowdown in the first quarter was transitory.

Economic data in recent weeks has shown a split between the strong labor market and weaker data like gross domestic product and the factory sector. Data on Monday put the manufacturing sector in a technical recession.

The Fed comes down on the side of the strong labor-market data, said James Glassman, economist at J.P. Morgan Chase.

“They think the economy is doing fine,” and the majority on the Fed now favors starting rate hikes soon and going slowly, he said.