The Fed is almost certain to leave interest rates unchanged at its policy meeting, which concludes next Wednesday, but the statement should keep open the prospect of a hike in June. Admittedly, the surprise drop in core inflation in March may have troubled some Fed officials. But assuming that employment growth rebounds this month, we expect the Fed to push ahead and raise rates at the June meeting, particularly with financial conditions remaining so loose. We expect the Fed funds rate to climb to between 1.50% and 1.75% by end 2017.
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