February 22, 2016

US Economic Update: 22 February 2016

The Fed has consistently signalled rate hikes will be gradual.

US Economic Update:  Fed funds rate – 22 February 2016

  • We have pushed out our expectation of the next Fed funds rate hike from June quarter 2016 to September quarter 2016.
  • We have also slowed the pace of increases through to mid-2017 and lowered our expectation of the peak fed funds rate in this tightening cycle to 3.0%.

In the light of recent developments in financial and commodity markets, we have changed our view on the likely path of the federal funds rate. Our revised projection calls for a slower pace of increases earlier on and also lowers the expected peak rate. This is in the light of the recent tightening in financial conditions, an expectation that bouts of financial volatility are unlikely to go away soon, and further indications that inflation expectations are falling, all of which will induce Fed caution.

For further details please see the attached document