Markets continue to disagree with Fed call for 3 rate hikes in 2017

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As U.S. equities entered their last trading day of the year on Friday, markets remained unconvinced that the Federal Reserve’s (Fed) call for three rate hikes in 2017 would hit the mark.

When the U.S. central bank raised rates in December 2015 for the first time since the financial crisis, its members forecast that it would tighten policy a total of four times throughout this year.

However, the Fed passed through 2016 with only one increase at its last meeting on December 14.

Looking to the year ahead, the economic projections revealed that the Fed expected to tighten policy a total of three times, up from the prior September estimate of only two.

Yet markets were unwilling to jump the gun and align their outlook with that of the U.S. monetary authority.

As of Friday, Fed fund futures priced in the first hike in 2017 at the June meeting with a probability of around 65%, according to's Fed Rate Monitor Tool.

Odds stood at 50.8% for a second rate hike at the November meeting.

However, unlike the Fed’s forecast, markets priced in the chance of the Fed hiking rates three times by the end of 2017 at only 35.7%.

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