The U.S. Federal Reserve has made a "policy mistake" by holding back further rate hikes in 2016 as the U.S. economy is growing strongly and a hawkish monetary policy is therefore needed, according to a report by London-based ETF Securities.
The Fed passed on raising its interest rate target at its March meeting this year citing global economic and financial situation as a risk. Policymakers had previously signaled in December that four rate rises were likely in 2016.
However, the report from ETF securities suggests the lack of hike in March was an error in judgment from the US policymakers. It seems like the Fed's board of governors has become more dovish since the December meeting and the market is now pricing in only one rate hike by the end of the year.
ETF Securities, however, believes the Fed has slipped up.
"Real GDP (gross domestic product) trends indicate that the pace of U.S. economic growth is solid. While the growth path of real GDP is not as strong as pre-crisis levels, there is no evidence of a slowdown. Such a growth path warrants tighter monetary policy," ETF securities said in a statement.