Indeed, the biggest contrast with this time a year ago is that financial markets seem to believe it. At the start of 2016, Fed officials were envisioning raising rates four times over the course of the year, but bond market prices suggested investors weren't buying it and thought only one or two rate increases were on the way.
The markets were right. With some weak economic data and tumbling oil prices and volatile stock markets, the Fed stayed its hand.
The start of 2017 could hardly feel more different. Stock markets are booming, as are measures of consumer and business confidence. Economic data, including jobs numbers Friday, have been solid. Investors see a 60 percent chance that the Fed will raise rates three or more times this year, based on prices in future markets Friday.
This time, in other words, the market actually believes the Fed will follow through with its plans to gradually raise rates. One piece of evidence is that Fed officials, during the week of Feb. 27 to March 3, confidently signaled that a March 15 rate increase was imminent. By doing so before the February jobs report was released, they were making clear that even if that report had been soft, they were committed to rate increases.
The officials appear to have plotted a course to raise rates a few times a year with expectations of reaching the so-called neutral rate - at which monetary policy is neither stimulating nor slowing the economy - near the end of 2019. As of their December meeting, Fed leaders think that neutral rate is 3 percent.
But at the Fed, the momentum now evident in the economy feel hard won, and officials may be reluctant to risk it by tightening the monetary spigots prematurely.
Even if the central bank's most recent forecasts become reality, it will represent a historically slow pattern of monetary tightening - four years to raise interest rates by about three percentage points. In the 1994 cycle, engineered by the chairman Alan Greenspan, a rate rise of that scale happened in just 13 months.
The big question for the months ahead is what it would take to change direction once again. Would a new soft patch in the economic data, a new bout of market turbulence or a new crisis lead Ms. Yellen and her colleagues to again retreat to the wait-and-see school of interest-rate increase?
“I do think there's some greater willingness to tolerate some shortfall in the data compared to expectations,” said David Stockton, a senior fellow at the Peterson Institute for International Economics and a former Fed official. “They are exhibiting more confidence in the economy, but that doesn't mean that confidence couldn't dissipate in the face of some scary event.”
The new, more confident, interest-rate-raising Fed will last, in other words, as long as events allow it to.
