A recent string of less-than-stellar economic news has injected some uncertainty into whether the Fed will deliver a steady diet of rate increases ahead.
In fact, current trading in the fed funds futures market indicates that the U.S. central bank will not be able to enact the two additional rate hikes that officials have indicated are on the way this year.
As of Thursday afternoon, market indications were for a 57.3 percent chance of a quarter-point increase in the benchmark short-term rate in June, while there's just a 41.1 percent probability that it would move again in December. The June probability was less than 50 percent on Wednesday but rose Thursday on the heels of better-than-expected 0.4 percent growth in the leading economic indicators barometer and a stock market rally.
Those expectations are counter to the past couple of months, when investors grew more comfortable with the idea that the Fed would be able to lift rates off their crisis-era lows. The first rate hike since mid-2006 happened in December 2015, with the next one not coming again until December 2016. The policymaking Federal Open Market Committee hiked again in March, with officials then pointing to a total of three moves for the year.
However, the 2017 projection came amid higher hopes for growth and a belief that inflation and labor market slack were progressing toward the Fed's goals.
"If it moves too fast, that's where we might have risk, because capital flows will move back from emerging markets into the U.S. market, and that could precipitate some disorderly adjustments in those other countries," Lagarde told CNBC in a live interview. "Let's hope it proceeds in a smooth, well-communicated and orderly manner, as fact-based as possible, as has been the case so far."
The economic signals of late have not been conducive to a central bank looking to normalize policy after years of cheap money.
Since the last FOMC meeting, a key inflation indicator fell for the first time since January 2010, the March nonfarm payrolls report significantly missed Wall Street expectations and the Atlanta Fed now expects the economy to show growth of just 0.5 percent for the first quarter.
On top of that, President Donald Trump's pro-growth agenda has hit a bit of a wall in Congress.
"If you look at the data in the first quarter, it's suggestive of a slowing down in the economy," said Quincy Krosby, market strategist at Prudential Financial. "There's a fear that we're losing momentum."
However, one prominent economist thinks traders are getting it wrong on rates.
"Market pricing of future Fed rate hikes has declined in the wake of weaker GDP and inflation data, signals of an earlier Fed balance sheet runoff and reduced optimism on fiscal easing," Jan Hatzius, chief economist at Goldman Sachs, said in a note. "But markets may be underestimating three factors pointing toward continued steady hikes."