Comments from central bankers have been dovish in recent days – they seem to be backing down from earlier statements that suggested that the fed funds rate could increase by one percent or more this year.

St. Louis Federal Reserve President James Bullard noted that ‘with renewed declines in crude oil prices in recent weeks, the associated decline in market-based inflation expectations measures is becoming worrisome.’

He further said that while central bankers try to ‘look through’ oil price changes, ‘inflation expectations themselves begin to change due to changes in oil prices,’ implying a self-fulfilling prophecy.  If inflation expectations fall, that ‘would tend to push off rate increases.’

At this point, the meeting to watch is in March.  Markets are not ready for a hike at the meeting later this month and there is no meeting in February.

We’ll have to see whether markets settle down by mid-March, which sounds like a stretch, but you have to keep in mind that the selloff in August and September of last year was virtually erased on October.

Personally, I will be surprised if they raise fed fund rates by one percent or more this year and, so far, it appears that markets agree.