The Fed chorus about a possible March interest rate hike is getting much louder, and an upcoming inflation report could clinch what was until recently considered a long shot.
The latest Federal Reserve official to push the the group's March meeting into play was New York Fed President William Dudley, viewed as a close ally of Fed Chair Janet Yellen and a central figure in the Federal Open Market Committee. Dudley said on CNN International Tuesday afternoon that the "case for monetary tightening has become more compelling."
Four Fed presidents spoke Tuesday, and all indicated an interest rate hike could be considered in March. "All are on the same page, including hawks and doves, and especially Dudley," said Tom Simons, money market economist at Jefferies.
Treasury yields shot up after Dudley's comments. The 2-year yield reached 1.28 percent, its highest level of the year, and well off the day's low of 1.16 percent. The 2-year note is the most sensitive to Fed rate hikes.
"He stoked the flames. When he says the case for tightening is a lot more compelling, to me that's a sign that they are getting things together for March now," said Simons. Most Fed watchers have been forecasting a June rate hike, though strong inflation and retail sales data and hawkish comments from Yellen raised the odds for March and May in recent weeks.
Odds got even higher as more Fed presidents chimed in about a March hike. By some measures, the market odds for a March hike jumped to about 70 percent from