Fed: Next rate hike to come at the September meeting - Nomura

Research Team at Nomura, notes that in Q1, the US economy slowed growing only 0.8%, but recent data suggest better performance to start Q2.

Key Quotes

“We believe activity will pick up in the near term before reaccelerating above potential in H2 2016.

We expect the economy to “overshoot” full employment to some extent, facilitating more inflationary pressure. But core inflation should rise only slowly due to lingering effects of the stronger dollar and lower NAIRU.

We expect only a modest recovery in potential growth to about 1.75% over the next couple of years. Given recent Fedspeak and weak data, we expect the next rate hike to come at the September meeting. Tighter financial conditions, further appreciation of the dollar and slowdown in global growth remain the key risks.”