Fed likely to press ahead with rate hikes

The political brouhaha in Washington, D.C., looks unlikely to blow the Federal Reserve off course from raising interest rates further 2017, starting with an increase next month and following up with another later in the year.

Fed watchers said the central bank will move forward with plans to gradually normalize rates to rein in an economy that officials believe is growing above its potential and prevent an already-stretched labor market from becoming even tauter.

'Unlike in 2015 and 2016, the Fed has made pretty clear that it's on a trajectory of tightening rates that will not likely be derailed,” said Jonathan Wright, a former central bank economist who's now a professor at Johns Hopkins University.

Policymakers in March penciled in two more rate hikes for this year after raising them for the third time since the end of 2015. They next meet June 13-14, when they'll update their forecasts for the economy and interest rates.

Traders in the money market put the odds of a rate rise next month at about 65 percent, down from 85 percent on May 9. They also lowered the probability of a third hike this year to well below 50 percent.