There has been much speculation over the course of 2015 as to whether the U.S. Federal Reserve will raise interest rates or keep them at the current near-zero levels.

It seems that the time is drawing closer for interest rates to rise, with the New York Fed President William Dudley hinting that a hike is forthcoming. The only question remaining, seems to be ‘when’, not ‘if’.

Mr Dudley, who is also the vice chairman of the Federal Open Market Committee, thinks that the moment is close for the first raise in interest rates since 2006. He recently stated as follows;

“The economy looks to be in decent shape and is likely to continue to grow at a slightly above-trend pace… I think it’s quite possible that the conditions the Committee has established to begin to normalise monetary policy could soon be satisfied… I will be evaluating the incoming information to see if it confirms my expectation that growth will be sufficient to further tighten the U.S. labour market.”

A recent government report showed that some 271,000 new jobs were added in October, which saw U.S. unemployment rates fall to just 5%. Yet Dudley remains cautious, stating that “we have not see compelling evidence” that the tighter jobs market would result in compensation gains.

Such reticence suggests that a rise in rates before the end of the year is very much a ‘possible’ outcome rather than a ‘probable’. It also seems likely that when the increase does come, it will be gradual.

Dudley has claimed that, “After lift-off the upward trajectory of the short-term rates is likely to be quite shallow.” Meanwhile, Chicago Fed leader Charles Evans agrees, predicting that the rate of increase could be so gradual that interest rates could be less than 1% by the end of 2016.

Despite employment gains and his expectation of 2.5% GDP growth next year, Evans doubts that inflation will hit the 2% target set by the Fed, saying that, “I am far less confident about reaching our inflation goal within a reasonable time frame… I expect core PCE inflation to undershoot 2% by a greater margin over the next two years than do my colleagues.”

An International Monetary Fund paper released on Thursday shared Evans’ concerns and suggested that the Federal Reserve should establish that inflation is rising before increasing interest rates, writing that;

“The Federal Open Market Committee’s decision should remain data-dependent, with the first increase in the federal funds rate waiting until continued strength in the labour market is accompanied by firm signs of inflation rising steadily toward the Federal Reserve’s 2% medium-term inflation objective.”

Despite the cautious tone adopted by some senior Fed officials and the IMF, a Reuters poll this week predicted a 70% chance of rates being raised at the U.S. central bank’s mid-December meeting.

We shall soon see if the Federal Reserve lives up to this expectation, or plays it safe. Whatever the outcome, investors’ ‘interest rates’ in following this saga are set to remain high throughout the next 12 months.