Ahead of the start of the US central bank´s two-day policy meeting, on Tuesday, economists and market commentary seem to be mulling the possibility that the Federal Reserve might soon begin to signal that interest rate increases could begin sooner than expected.
That comes as volatility in financial markets is at seven-year lows, with a change in central banks´ timing on the start of interest rate hikes - above all in that of the Federal Reserve - seen as one of the few possible, yet unlikely, triggers, for a rebound.
It is now a well-known fact that the Fed´s revised economic projections due to be released on Wednesday will point to gross domestic product expanding more slowly than previously expected this year.
Less well-known perhaps is the posibility that it will also lower its projections for the unemployment rate while at the same lifting its estimates for inflation. At 6.3% the former is already at the top end of the range which had been expected for the last quarter of 2014. Simultaneously, the three-month annualised rate of core PCE inflation was already up to 1.8% in April, above the 1.4% to 1.6% which had been thought would be the case at the end of this year.
"[The Fed´s] new economic projections may prompt speculation that the first interest rate hike could come earlier than markets currently expect," Capital Economics explained in a note to clients last week.
As if on cue, in an interview with Marketwatch.com on Monday afternoon Alan Blinder, former Vice Chairman of the Federal Reserve said that "this loud and vociferous debate will definitely roil fixed-income markets and the volatility could spread to equity markets".
"But the fact is there are serious disagreements among the Fed, and without naming names, there are a number of people on the FOMC that don't hesitate to go public with their disagreements," Blinder said.
Perhaps not surprisingly, nevertheless, most of the experts with whom Sharecast has talked do not expect anyone at the Fed to rock the boat at this point.
Similarly, and despite the above, Capital Economics continues to believe that the first rate hike will take place in the middle of next year. The main reason for that is that the Fed has insisted that the Fed Funds rate will not rise until a "considerable time" after the asset purchase programme concludes, at the end of this year.
However, "should wage growth and core price inflation rise within the next six months, the balance of risks will shift towards the first rate hike coming earlier in 2015," the think-tank added.
For its part, on Monday the International Monetary Fund itself waded into the simmering debate. In the summary of its Article IV consultations with the US it argued that, "under the staff's baseline, the economy is expected to reach full employment only by end-2017 and inflationary pressures are expected to remain muted. If true, policy rates could afford to stay at zero for longer than the mid-2015 date currently foreseen by markets".
Lastly, and despite all of the above, it must be pointed out that this past weekend some market chatter was citing Goldman Sachs forecasts for yields on 10-year US Treasuries to end the year lower than where they were currently standing.