The biggest open question for investors is not when the Federal Reserve will raise interest rates, or whether it’ll still be doing so a year from now. It’s how long of a pause will there be between the first and second moves.
Futures markets project the U.S. central bank will raise its benchmark federal funds rate at least once this year. It’s been pinned near near zero since 2008. Whether the second increase comes before 2015 ends or gets pushed out to early 2016 is up in the air.
After that, the prospects for the timing of the third, fourth and fifth moves are relatively solid. Eurodollar futures imply a 90 percent chance of one rate increase in the second quarter of next year, a 96 percent chance of another in the third quarter and a 90 percent chance of one in the final three months of 2016.