Following the release of disappointing US jobs market data, some economists revised their outlook for the path of the Federal Reserve’s monetary policy.
Analysts at Bank of America Merill Lynch, Barclays and Goldman Sachs note that US economic growth is slowing. Moreover, the UK referendum on the European Union is likely to prevent the US Federal Reserve from raising interest rates at its next meeting scheduled for June 14-15.
Michael Gapen, chief US economist at Barclays Plc, expects the Fed will raise rates just once this year, in September. He also believes some FOMC members would prefer to see the outcome of the UK referendum before moving to hike rates again.
“We no longer expect a rate increase at the June meeting,” economists at Goldman Sachs Group Inc. said. “We now forecast the next rate hike will come in September.”
Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch, has also changed his call. “Although financial conditions have improved, there are still concerns about an uncertainty shock related to the markets, UK referendum and US elections. We still believe the Fed is engaged in a normalization process and look for the Fed to hike again in March next year after moving rates higher in September,” he noted.
