Signals point to interest and inflation rates spiking higher than markets predict during 2016—despite near-zero inflation at the moment.
The Fed intends to raise rates four times, up only 100 bps, but it could still change its mind—it all depends on the state of the economy, and that intention of four raises would actually mark the slowest rate of increase for a tightening cycle in the Fed's history.
Even if the Fed sticks to the game plan, markets are still pricing futures at only a 50 bps raise.
On top of that, the nosedive of commodities inflation has halted, and is poised to ascend. Core CPI has already been increasing—expect headline inflation to follow.
The 5% unemployment rate (full employment by some metrics) will drive inflation also—it has already pushed wages up 2.5%. [TheStreet]
