A gradual and limited adjustment to Fed S-T rates – Nomura

By FXStreet FXStreet (Guatemala) – Analysts at Nomura explained that the FOMC’s intent appears to be to slow the rate of growth of the US economy to a pace that is consistent with a reduced rate of potential growth. Our forecast reflects a transition to growth along a path that is roughly consistent with full employment.

Key Quotes:

“Several points are worth noting. We expect the US economy to “overshoot” full employment somewhat over the forecast horizon. That should facilitate a modestly more rapid acceleration in inflation, something the FOMC wants. That said, we expect core inflation to rise relatively slowly in part because the effect of the past and the prospect of a future appreciation of the dollar will likely weigh on core inflation for some time.

Moreover, we do not think this transition to slower growth will require a substantial, or rapid, increase in interest rates. We expect the FOMC to begin the process of adjusting rates at its meeting later this month, but we expect only a gradual and limited adjustment of short-term interest rates.”
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Source:: FX Street