The key now for the Fed, as it deliberates
when to begin to raise rates, is to gauge how
quickly the output gap is likely to close.
The pace at which the U.S. economy
takes up slack is likely to command a great
deal of attention from the Fed and market
participants in the coming months.
We believe the first Fed rate hike is likely to
occur in about a year’s time, assuming the
economy tracks the FOMC’s forecast.