Federal Reserve

If Fed wants 3 rate hikes this year, it needs to move in March: Former Dallas Fed advisor

I didn't hear 'balance' or 'sheet': DiMartino

Raising interest rates in March will be necessary if the Federal Reserve wants to stick with its goal of three hikes a year, former Dallas Fed advisor Danielle DiMartino Booth told CNBC on Wednesday.

"They need March because if they don't, then they've only got three other meetings for the rest of the year to go," DiMartino Booth said in an interview with "Power Lunch."

That's because there are only three meetings after March that have press conferences, and she believes the central bank will only move during those times.

Minutes from the Fed's Jan. 31-Feb. 1 session, released on Wednesday, gave a strong indication that another hike could happen soon.

"Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon" if data on jobs and inflation are "in line with or stronger than their current expectations," or if the risk increased that the Fed might overshoot its goals, the meeting summary stated.

Richard Clarida, global strategic advisor at Pimco, thinks the Fed will have to do more than say "fairly soon" to get a March rate hike priced in by the market.

"March would make a lot of sense to me but if the Yellen Fed wants to get that priced in, they've got some work to do," he told "Power Lunch."

Fed: Rate increase could come 'fairly soon'

Market expectations are currently low for an increase at that meeting, about a 1 in 5 chance. Currently, markets are forecasting a hike in June and then again in November or December, according to CME's Fed funds futures tracker.

"This is a Fed that expects that if the data play out, they're going to be hiking three times this year," Clarida noted. "The only question for them is do they want to tee up the March meeting so that it's not a surprise or do they want to be really bold, not tee up the market and then hike in March."

One thing that the market doesn't appear to have to worry about is double tightening, which would be a rate hike and the unwinding of its balance sheeting, DiMartino Booth said. The words "balance sheet" would allude to that occurring and they were not anywhere in the minutes, she explained.