4 rate hikes by Fed likely next year

After almost a decade the Fed initiated its monetary tightening policy with 25 base point rate hikes yesterday.  The labor market showed a sign of improvement and economic growth rate on track. The unemployment rate started falling; experts believe that the unemployment rate will be below target level during 2016 - 18. 

With the expansion of labor market and stronger US dollar, the inflation rate is expected to increase further. The annual core CPI inflation was recorded at 2.0% year on year in November.

"We anticipate that the Committee will increase the Fed Funds Rate four times in 2016 and another four times in 2017. Key to this view will be continued momentum in the labour market and a firming in global growth; both are necessary to mitigate downside risks to the outlook" says Westpac in a research note.