Atlanta Fed President Dennis Lockhart stirred up the drama today after saying that the United States could see up to two additional interest rate hikes this year. Lockhart's comments boosted the dollar, while stocks and gold fell, as investors prepare for the Fed's meeting next month.
"Two rate hikes are certainly possible. We have enough (Fed policy) meetings remaining but it depends entirely on how the economy evolves," Lockhart said, while also warning that a British exit from the European Union could raise economic risks.
The DOW, NASDAQ, and S&P 500 indexes all slipped over 1% in morning trading following these reports. While interest rate hikes don't necessarily have a direct effect on stocks, they are often considered as bad news for consumer spending levels, which can cut into businesses' bottom lines.
On the other hand, interest rate hikes and related rumors tend to boost currencies over uncertain stocks and commodities that don't bear interest. The U.S. Dollar Index (DXY) edged upward Tuesday morning, gaining about $0.31.
While Lockhart's comments suggest that the Fed has enough meeting this year to raise rates multiple times, a rate hike is not predicted to occur following the Fed's meeting in June. According to the "FedWatch Tool" from the CME Group , the probability of a rate hike in June stands at just 13%.
Nevertheless, Lockhart asserted that investors should put more weight on a June hike being a "real option."
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