18 Jun 2015
US growth to pick up in H2, September hike remains on the cards – Nomura
FXStreet (Barcelona) - Economists at Nomura, believe that the improvement in consumption and housing fundamentals will play a key role in lifting US growth in the second half of 2015, and further add that September remains the likely timing for the Fed rate lift-off.
Key Quotes
“We expect economic growth to pick up in the second half of the year. The fundamentals for housing and consumption remain positive and we expect declines in investment in the oil and gas sector to moderate quite soon. Consequently, at this point, we still think that September is the most likely option for the first rate hike, but that judgment will have to be reassessed as external developments evolve and economic data is released.”
“Looking beyond 2015, the FOMC’s economic forecasts were little changed, but the Committee did lower its forecasts for interest rates. The interest rate declines in 2016 and 2017 were relatively modest and expected. Moreover, the changes in the Fed’s interest rate forecasts for 2016 and 2017 bring them more in line with market expectations.”
“We have argued elsewhere that tighter financial conditions since March, primarily through higher term premia, probably warrant a somewhat slower pace of interest rate adjustment in 2016 and 2017. Moreover, we have also questioned whether interest rate increases beyond 2% are likely given the current state of the US economy.”
“The bottom line is that the Committee seems to have raised the bar somewhat for liftoff, and it has generally moderated its expected path of interest rate increases. Although we think that the probability of a first rate hike in September has gone down, we still think, at this point, that it is the most likely date for liftoff.”
Key Quotes
“We expect economic growth to pick up in the second half of the year. The fundamentals for housing and consumption remain positive and we expect declines in investment in the oil and gas sector to moderate quite soon. Consequently, at this point, we still think that September is the most likely option for the first rate hike, but that judgment will have to be reassessed as external developments evolve and economic data is released.”
“Looking beyond 2015, the FOMC’s economic forecasts were little changed, but the Committee did lower its forecasts for interest rates. The interest rate declines in 2016 and 2017 were relatively modest and expected. Moreover, the changes in the Fed’s interest rate forecasts for 2016 and 2017 bring them more in line with market expectations.”
“We have argued elsewhere that tighter financial conditions since March, primarily through higher term premia, probably warrant a somewhat slower pace of interest rate adjustment in 2016 and 2017. Moreover, we have also questioned whether interest rate increases beyond 2% are likely given the current state of the US economy.”
“The bottom line is that the Committee seems to have raised the bar somewhat for liftoff, and it has generally moderated its expected path of interest rate increases. Although we think that the probability of a first rate hike in September has gone down, we still think, at this point, that it is the most likely date for liftoff.”