(Bloomberg) -- Robust U.S. economic data means the Federal Reserve may still end up raising interest rates even after Chair Jerome Powell’s signal that policy is on hold.
That’s the view of Jerome Jean Haegeli, chief economist at the Swiss Re Institute, who likened the outlook for U.S. monetary policy to a traffic roundabout.
"They will be turning more hawkish," said Haegeli, who is a former Swiss National Bank and International Monetary Fund official. He tips two further rate hikes.
Haegeli highlighted the rebound of a gauge of U.S. service industries as a sign that the Fed will have more work to do. "The fundamentals are not that bad," he said.
Turmoil in financial markets helped convince Fed officials in recent weeks to back away from their December projections for two rate hikes in 2019. Several policy makers, including Powell, have emphasized their intention to be “patient” in deciding when and how next to adjust rates.
The FOMC will meet again March 19-20, with investors and most economists predicting rates will be kept on hold for a second straight gathering.
Still, it’s less clear how long the underlying momentum in the U.S. economy can hold up and the chances of a recession next year are about 40 percent, Haegeli said.
He also cautioned about a disconnect between this year’s rally on world markets and mixed underlying economic fundamentals.
"There is a dichotomy between the rally we are seeing -- we are in spring time -- but the economic environment is still more in the winter," he said.
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