"The economy continues to recover in the U.S. Inflation pressures will emerge in the second half of this year."
- Hiroki Shimazu at SMBC Nikko Securities Inc.
The number of economists projecting the Federal Reserve will start increasing interest rates later this year is constantly rising. Hiroki Shimazu from SMBC Nikko Securities, Chris Rupkey at Bank of Tokyo-Mitsubishi UFJ and James Smith from Parsec Financial Management Inc. are strategists, who are speaking in favour of increases this year. The Fed has kept its key refinancing rate in a range of zero to 0.25% during the last five years; however, the latest projections look probable taking into account the fact, these strategists are the most accurate forecasters on the biggest part of the U.S. GDP.
The fact that more and more economists are getting more hawkish about the U.S. economy in theory should boost the U.S. Dollar higher. In reality, the buck has lost 0.98% during the last week, while the EUR/USD pair was traded around 1.37 level. A gaping hole in the U.S. data calendar on Monday means the greenback will remain under pressure, as the effect of disappointing industrial production will still be a massive drag on the U.S. currency. While some can claim this effect to be short-lived, the latest weakness is a result of the economic data trend over the past several weeks. Amid this news it is getting more obvious the world's largest economy is losing momentum. Should it be the reason for the Fed to become less optimistic about the future outlook or Janet Yellen will continue tapering the stimulus programme as planned?
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