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The Federal Reserve's crystal ball is getting a little cloudy.
The data that the U.S. central bank uses to decide whether or not to raise interest rates is showing inconsistent signals about the health of the nation's economy, just a few months after the first rate hike in nearly a decade. And that's making it less clear where the Fed will take rates in the months ahead.
The Fed said to expect "gradual" increases this year after it raised rates by a quarter point in December. The plan was widely interpreted to be 4 rate hikes totaling a 1% increase over the course of the year, but the latest economic reports have been mixed.
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But many observers believe recent data, combined with market turmoil, mean the next hike will not happen at the Federal Open Market Committee meeting that will take place Tuesday and Wednesday.
But that's far from a lock. The decision is not an easy one to predict, even though the data used to guide it is widely distributed, says economist Diane Swonk of Diane Swonk and Associates.
"Unfortunately it's not as simple as trigger points," she says. And although it's known that the Fed keys in on certain information like inflation, she says, "there's not a checklist."
Source: Bankrate Economic Indicator survey
While many economists don't see a rate hike coming at the March meeting, there is still a chance it could happen.
"Rates of economic activity are stronger than people thought," says Robert Johnson, the director of economic analysis at Morningstar. He points to recent reports that show strength in industrial production and gains in retail sales, durable goods and wages.
Johnson also notes inflation for consumer goods rose 0.3% from December to January, ahead of estimates for a 0.1% increase. The price of gas has even reversed course after months of decline and started to edge higher, he points out.
"From a fundamental standpoint, if they're really basing this on economics, the fundamental data looks strong and the inflation data looks strong," Johnson says. "We could be at 2% headline inflation by June."
That 2% figure is key, because it's the Fed's target for inflation.
Johnson doesn't see a rate hike coming this time. "But I certainly do think the numbers are heating up," he says.
Employment looking strong
Another key measure for the Fed is the employment report, which showed strong gains for February. A better-than-expected 242,000 jobs were added last month, and the unemployment rate held steady at 4.9%.
William Dudley, New York Federal Reserve Bank president and a close ally of Fed Chair Janet Yellen, said in a recent speech that while some indicators look weak, he expects overall growth of about 2% for the year, and he expects further declines in the unemployment rate.