Fed officials are attempting to prepare the market for a rate hike in March as best they can. They proclaimed loudly on Tuesday that March is the right time. The market is listening. On February 22nd traders pegged the chances of a March rate hike at 35%, by Tuesday night odds had risen to an 82% chance. Early morning trading on Wednesday appears to show even more confidence in a March hike.
Also illustrating the market’s confidence in a March hike is the movement in the 12 month Treasury bill, which is typically sensitive to expectations of Fed funds rate moves. You can see in my chart below that the 12 month T-bill is leading higher as expectations for rate hikes solidify.
New York Federal Reserve Bank President William Dudley called the possibility of a rate hike in March “a lot more compelling,” thanks to the “animal spirits” being unleashed by the presidential election results.