WASHINGTON >> Things looked so clear back in mid-December. The Federal Reserve raised its benchmark interest rate from record lows, and it signaled the likelihood of four more hikes in 2016.
That was then.
Panicky financial markets, global weakness and slumps in key U.S. economic sectors have since clouded the outlook for more rate increases. Friday's jobs report for January further complicated things. It showed more pay for workers and rising confidence among job seekers.
So are further Fed rate hikes coming soon? No one seems sure. But as Chair Janet Yellen addresses Congress this week, most analysts and investors think the Fed will raise rates fewer than four times this year, if at all.
On Wednesday, Yellen will outline the Fed's outlook in the first of two days of semiannual testimony. It's unclear how much she'll say about the likely timetable for rate increases. She and other Fed officials have stressed that their decisions remain "data dependent" — that is, hinge largely on the latest economic data.
Growth still slow
Much of that data has been tepid since the Fed raised rates in December for the first time in nearly a decade. Manufacturing has slumped. Corporate profits are down. Business stockpiles are up. Shrunken oil prices have squeezed energy companies. Weakness in China and other emerging economies has rattled investors.
On the other hand, the job market — the most vital part of the economy — remains solid. Worker pay is even starting to show its first significant gains since the Great Recession ended 6½ years ago. The Fed has long awaited faster wage growth for evidence that the job market is as strong as the steady hiring gains and low unemployment rate (now 4.9 percent) would suggest.
Once the Fed began raising rates late last year, the widespread expectation was that it would continue to boost its benchmark rate gradually but steadily, most likely starting in March. But that was before China, the world's second-largest economy, signaled that it was slowing even more than expected and oil prices resumed their fall. Global markets have sunk in response. The Dow Jones industrial average has dropped 7 percent so far this year. The tech-heavy Nasdaq has shed 13 percent.
The value of the dollar has also strengthened further, crimping manufacturers, whose export sales fell last year for the first time since the recession year of 2009. A key manufacturing gauge has been in recession territory for four months.
The overall economy grew at a meager 0.7 percent annual rate in the October-December quarter, leading some analysts to begin wondering about the possibility of another recession within a year or two.
"If you look at the economic data that has come out since December, it shows considerable weakness," said Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University. "Given all the domestic and global economic problems right now."