Fed’s Williams sees three to five rate hikes this year

And it continues to fall short of hitting that goal, as measured by the Fed’s preferred inflation gauge.

Feldstein said that would still leave real rates negative after taking account of inflation, potentially promoting yet more speculation in markets that are already seriously overvalued.

Minutes of the Federal Reserve’s December meeting showed Wednesday that the participants foresaw only a “gradual” series of interest rate hikes following the first one unanimously agreed at that meeting. At the same time, they expressed significant concerns that it may remain stuck at low levels, particularly because of further declines in oil prices.

“Those numbers are in the ballpark”, Fischer said, but acknowledged the markets could be correct in projecting fewer hikes in 2016, given worldwide uncertainty over North Korea, the Mideast and China.

The Fed said at the meeting and reiterated in its minutes that officials planned to move gradually toward additional interest rates increases because of these and other uncertainties. The minutes emphasized their intention to take a go-slow approach.

The outlook wasn’t all worrisome.

Overall, officials said the risks to the economy were balanced. Even economic giants such as China will have to cope with a more hard environment.

The minutes also stressed gains in the labor market, not just for the month preceding the December meeting – which saw stronger-than-expected job growth – but for the entire preceding year. They emphasized that rate increase could be faster or slower than anticipated based on the progress of the economy and inflation. The wild gyrations in oil and commodity prices have been made worse by an unhealthy speculative environment, in which interest rates are not able to perform their proper role in the efficient allocation of credit in the economy.

The weekly chart for the yield on the 30-year U.S. Treasury bond shows a downtrend from the 6.75% high in January 2000 through the lower highs of 5.44% in June 2007 and 4.79% in February 2011.

The derivatives market is pricing in about two Fed increases this year, compared with the four moves that Fed officials laid out in their latest quarterly forecasts.

Prices in federal funds futures contracts suggest investors see zero chance of a rate increase when the FOMC next convenes on January 26-27. However, it does aptly describe the position of the Open Market Committee of the Federal Reserve (FOMC), the policy making arm that determines the direction of interest rates, after recently raising the target range for the federal funds rate to 0.25 percent to 0.50 percent. And he questioned whether Congress had gone too far in limiting the Fed’s ability to intervene if a crisis erupted and threatened the financial system.