BBVA Compass economists lay out their reasons for raising their estimate to three rate hikes in 2017 in their latest Fed Watch report, pointing to the underlying strength of the economy and a series of hawkish speeches by key Federal Open Market Committee members.

We now expect the Fed to raise interest rates by 25bp at its March meeting,” writes BBVA Compass Senior Economist Boyd Nash-Stacey. “… Assuming risks remain balanced, financial vulnerabilities and geopolitical risks are contained, we expect two additional rate increases in 2017.”

Nash-Stacey walks through the current unemployment figures and inflation data, both of which he says support three rate hikes. He also details the political contingencies that could slow down the Federal Reserve, and what could lead to an even steeper tightening cycle to a higher long-term rate. The bottom line, writes Nash-Stacey, is that Federal Reserve Chair Janet Yellen’s press conference on Wednesday will throw significant light on the FOMC’s position.

We now expect the Fed to raise interest rates by 25bp at its March meeting. … Assuming risks remain balanced, financial vulnerabilities and geopolitical risks are contained, we expect two additional rate increases in 2017.

Read the full Fed Watch report here: http://bbva.info/2n1qViz

Led by Nathaniel Karp, the bank’s research team analyzes the U.S. economy and Federal Reserve monetary policy. For its analyses, the economists create models and forecasts for growth, inflation, monetary policy and industries. The Economic Research team also follows a variety of issues that affect the Sunbelt states where BBVA Compass operates. Follow their work on Twitter @BBVAResearchUSA and @BBVACompassNews.

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