Fed Faces Pressure for Two More Rate Hikes Amid Strong US Economy
Nordea strategists believe that the Federal Reserve will deliver two additional rate hikes due to a resilient US economy, persistent inflation, and continued labor-market strength. The economists argue that monetary policy is not yet sufficiently restrictive.
The strong US data shows few signs of easing in inflationary pressures, and the labor market remains robust, supporting the case for a more restrictive monetary policy stance. Nordea strategists maintain their forecast for two more hikes, with the risks tilted to the upside.
The buildout of data centers, driven by AI-related investment, is competing for scarce resources such as electricity, commodities, and construction capacity. This competition could lead to higher wages in specialty construction trades, potentially putting downward pressure on the unemployment rate and making inflation more persistent.