Featured # Markets | 2 years ago

U.S. Economic Growth Raises Experts Forecasts for a June Rate Hike

The United States economic growth slowed down for the first quarter, however not as sharply as experts predicted. A increase in home building and steady inventory accumulation offset the repercussions from a steep fall in business investments. Gross Domestic product for the U.S. increased at an 0.8 percent annual rate, opposed to its 0.5 percent pace in April, this according to the Commerce Department, when they unveiled their second GDP estimate for the January-March period. Although that was the weakest growth since Q1 in 2015, the sharp upward revision to income growth, coupled with a rebound in corporate profits, is set to brighten the picture for Q2.

“This gives us more confidence that growth will hit its marks in the second quarter … enough forward speed for the Fed to continue with its gradual pace of rate hikes,” said chief economist Chris Rupkey, of MUFG Union Bank in New York.

Economists believe that the Federal Reserve has the potential to raise interest rates as early as June, due to strong income growth and economic stability. The U.S. central bank increased rates last December, for the first time in over a decade. Minutes from the Federal Reserve’s April 26-27 policy meeting, which were published on May 18th, showed that most policymakers find it appropriate to raise rates as early as June, so long as data continues to point in the direction of improvement for second quarter growth. Fed Chair Janet Yellen is set to offer more clues as to the monetary policy outlook, when she speaks at Harvard University at 1:15pm Friday.

The dollar index .DXY increased against the greenback, as prices for U.S. Treasuries fell. U.S. stocks traded higher, with the Dow Jones Industrial Average up 34.21 points, or 0.19 percent, to 17,862. The Nasdaq Composite gained 25.32 points, or 0.52 percent, to 4,927.03, while the S&P 500 gained 6.31 points, or 0.30 percent, to 2,096.41 at the end of the morning session.

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