The US economy has advanced as the US Fed projected. The economic slowdown in the fourth quarter was brief. The economy’s fundamentals continue to be strong. Economic growth looks to have come back to its growth trend in Q1 2016. Officials will be positive that core personal consumption expenditures (PCE) will accelerate towards the target rate as long as labor market continues to absorb slack. Inflation expectations have rebounded to 1.55% from 1.11%.
Financial markets globally have calmed down after the rough beginning in 2016. Also, the US dollar has depreciated 4.6% since the end of January, coming back to the levels witnessed in October 2015. The US Fed has always been cautious when it has been in doubt. The US Fed is expected to continue hiking rates gradually with one move in June and other in H2, according to BBH.
Meanwhile, core inflation in the US is expected to trend higher slowly while moving into Q2, added BBH. Core inflation is expected to be mainly driven by shelter and medical services costs. Also, average hourly earnings are likely to strengthen.
