Fed Rate Hikes Remain on Path
|U.S. Review
Fed Rate Hikes Remain on Path
- The Fed raised the federal funds rate one quarter of a percentage point to 1.75 percent on Wednesday in a widely expected move, despite less-than-stellar economic data reported so far in Q1. Looking further ahead, seven Fed members now expect four or more rate hikes in 2018, three more than did in December.
- The U.S. current account deficit widened in Q4 to a nine-year high of $128.2 billion, with expectations of further widening this year as the dollar weakens. Durable goods orders rose 3.1 percent in February, much stronger than the consensus 1.6 percent estimate following a weak prior two months.
Global Review
Rate Hike in May by the MPC Still in Play
- CPI inflation in the United Kingdom fell from 3.0 percent in January to 2.7 percent in February, which could compel the Monetary Policy Committee (MPC) to remain on hold for the foreseeable future.
- But the labor market and the broader economy appear to be performing well, and the MPC has sounded more hawkish in the past month or so. We look for it to hike rates 25 bps at its next policy meeting on May 10.
- We look at effects on the U.S. economy from potential tariff retaliation in the “Topic of the Week” section of this report.
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