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US Economic Update – 12 April 2015

US policy makers split on rates ahead of a big week in terms of economic data

US equities rose last week in the aftermath of a poor payrolls report for March, which then left investors questioning the Federal Reserve’s likely resolve to begin raising rates this summer.

Interestingly the most recent round of FOMC meeting minutes, which were released last week, highlighted a deep division between US policy makers on the issue of when to begin hiking.

According to the minutes some believe that a rate hike could be appropriate as soon as June, while others believe that a stronger US dollar will weigh on economic activity in the run up to the summer period and that this could justify holding rates at current levels until later in the year.

One or two of the FOMC rate setters even went as far as to advocate holding back from lift off until 2016. It is with this lack of consensus among policy makers that markets found cause to extend their earlier gains right into the close of the week.

 

Looking ahead

Looking ahead, the current week is set to be a big one in terms of economic data. This is as retail sales figures for March dominate the calendar on Tuesday, while some housing data is due out on Wednesday. This is then followed by the all important inflation figures for March on Friday.

In regards to the CPI release we note that it is possible inflation flat-lined at the earlier 0.2% MoM level in the US during March due to the recent resilience of oil prices, although we believe it is unlikely that anybody expects fireworks from either the US housing market, or from retail sales numbers when those are released earlier on this week.

As a result, there is certainly sufficient scope for US equities to extend their recovery during the days ahead, although with the reporting season for Q1 now under-way there is also a risk that if corporate earnings disappoint, equity markets could struggle to make headway.

Dow Jones / Q1 2015

DOWJONESINQ1

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