Traders assign about a 94 percent probability, the highest level this year, to a Fed boost at its final meeting for the year on Dec. 13-14, futures contracts indicate. Trump’s spending plans, and Republican control of Congress, are causing the market to revise higher its outlook for the pace of Fed rate increases.
"The outlook for US growth is probably a bit firmer for both 2017 and beyond," said Su-Lin Ong, an economic and fixed-income strategist at Royal Bank of Canada in Sydney.
"Markets have then stepped up to pretty much fully pricing a December move, although we do need to see greater clarity from Trump and his new administration."
St. Louis Fed President James Bullard said there’s a chance the U.S. economy could get a medium-term boost if Trump increases infrastructure spending and tax reforms, though it’s too soon to say how the economy may be affected by the election. While Bullard offered that possibility, he said it’s still too soon to say how the economy may be affected by the election and he hasn’t changed his near-term outlook for growth or monetary policy. A “single policy-rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting,” he said, according to slides released by his office for a speech in London Wednesday.
Only "significant negative news" could derail the Federal Reserve's high expectations for raising U.S. interest rates next month, Boston Fed President Eric Rosengren
said.
Federal Reserve Governor Daniel Tarullo said the case for raising rates is stronger now than it has been in previous months due to economic indicators such as the increase in core inflation.
Philadelphia Federal Reserve President Patrick Harker said he supports an interest rate hike.
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