TCA Financial: US interest rates are set to remain low for longer after a worse-than-expected first reading on 2nd quarter GDP appeared to reduce the chance that the Federal Reserve will raise the fed funds rate when it meets in September.
The news buoyed gold and silver prices while investors digested the news over the weekend. Monday’s Asian trading session showed investors to be in optimistic mood as Tokyo and Hong Kong gained leaving only Shanghai in negative territory following a weak China manufacturing PMI read.
The GDP data from the US showed that business and inventory investment slowed markedly in the three months to the end of June despite apparently stronger support from a resurgent US consumer.
“We don’t think the support from the US consumer is sustainable and we don’t think that the rebound we saw in job creation in June is going to last either,” said Colin Phipps, chief economist at TCA Financial.
“We think rate hikes are off the table this year and, frankly, we don’t see anything on the horizon that’s going to lead to a rebound is US economic growth. It’s still our view that the Fed will be introducing another round of quantitative easing this or next year.”
TCA Financial says it believes the headwinds facing the global economy will continue to hamper Fed efforts to normalize monetary policy and further declines in global economic growth and a strong dollar will force the central bank to follow its counterparts in Europe and Japan back into ultra-accommodative policy.

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