Strong US retail sales support view of Fed rate hike by September

Stronger US economic data is increasing speculation that the Federal Reserve would be more likely to hike rates by September this year. Investors will be eager to look for clues in the June 17 FOMC meeting. The recent spate of improved economic data should help persuade data-dependent Fed policymakers that the US economy is on track for recovery and growth. It is expected to resume its fundamentally-sound moderate 2.5 to 3 percent growth trajectory after the contraction in the first quarter.

Further gains like in Thursday’s retail sales report raise the possibility that the Fed will normalize monetary policy and start raising interest rates by September (few expect any moves by the Fed in next week’s FOMC meeting).

The retail sales report showed an increase by 1.2 percent in May after upwardly revised gains of 0.2 percent in April (from 0.0 percent) and 1.5 percent in March (from 1.1 percent). These figures set consumer spending on a much steeper incline for the second quarter. For instance, May total sales were 9.5 percent annualized above the first quarter average.

The surprise in the report was that core sales, excluding autos, gasoline and building supplies, increased by 0.7 percent in May. That gain, in addition to upward revisions, boosted May core sales to 5.4 percent annualized above the first quarter average. Significantly, the gains (and upward revisions) were widespread.

The post Strong US retail sales support view of Fed rate hike by September appeared first on Forex Circles.

Source:: Strong US retail sales support view of Fed rate hike by September