The long Easter holiday weekend is a good time to reflect and ponder about the prospects for higher interest rates, world events, and a few other forgotten matters. It appears that Chair Yellen has a “mini revolt” on her hands as St. Louis Fed President Bullard, Atlanta Fed President Lockhart, and Richmond Fed President Lacker are publicly suggesting that another U.S. rate hike “may not be far off” and could happen as early as the April 26-27 FOMC meeting. (Lockhart and Lacker are not voting members this year but can voice their opinions.) The bond market thinks otherwise as does the majority of the other 17 policy makers who firmly believe that two more hikes are expected in 2016, with the first one likely in June. All Federal Reserve officials are free to express their thoughts publicly but are discouraged from going too far off script.

The official policy statement is firm on its duty to keep inflation below 2%, unemployment about where it is today, and hope for world events to stabilize. What the Fed is really looking for is oil finding a bottom around $50 per barrel, a modestly weaker dollar, and inflation expectations to remain well anchored. Our central banking friends on the other side of the ocean are locked into low interest rates, QE, forward guidance, and now negative rates. This brings us full circle to the U.S. bond market and what to expect over the next several months. Best guess: 25 bps Fed hike at the FOMC meeting in June and a yield curve that will look vey much like what we saw after the last hike in December. The volatility of the past few weeks will lessen but will not dissipate altogether. Nasty politics will persist and a plan to rescue Puerto Rico and its $72 billion debt problem will have some resolve.