The chart below shows market forecasts for short-term rates (3 month LIBOR) over the next three years based on EuroDollar futures contracts. As can be seen, the market is projecting a steady increase in short-term rates with an increase in the pace in mid-2012.
Markets have moved from 'Fed on hold for years' to 'Fed on the verge' abruptly since early November. While the chart above shows a snapshot, the chart below shows the trend of what the market is / has priced in for the one year Treasury yield, two years forward (bootstrapped from 3 year and 2 year Treasuries).
Note that current 1 year Treasuries are 0.27%, while the forward rate has jumped ~130 bps to ~2% since the first week of November.
Source: Federal Reserve