The Fed lowered its projections for US interest rate hikes in 2016 from four to two at its March meeting. This led markets to expect a more dovish monetary policy stance from the Fed. However, the document argues the Fed may still raise rates more than projected due to several reasons. Global economic conditions have improved since early 2016. Additionally, the strong US jobs market and higher-than-expected inflation could encourage the Fed to hike rates more than the projected two times. Therefore, markets may have overreacted to the Fed's dovish signals and a more hawkish surprise could occur.