Fed Hike Forecasts Set Back - Nomura
In response to the weak employment report and a string of other
unimpressive economic data, we changed our forecast for the timing of
the next interest rate hike to September from June.
In addition,
we now expect only 1 hike in 2016 and 2 hikes in 2017, down from our
previous expectations of 2 and 3 hikes, respectively.
Since the
FOMC raised rates in December, the US economy has grown at a relatively
modest pace and the pickup in inflation was short-lived. Economic
activity slowed at the end of last year and the BEA’s first estimate of
GDP growth in the first quarter was only 0.5%.
Currently, our Q1
GDP tracking estimate stands a bit higher at 0.8% but still well below
any reasonable estimate of potential growth. Early data for Q2 suggest
it will take some time for growth to reaccelerate. As a result, we have
lowered our forecast for growth in Q2 to 1.7% from 2.2% previously.
