Analysts at Brown Brothers Harriman explained that the US economy has evolved largely as the Federal Reserve anticipated. Key Quotes: "The slowdown in Q4 2015 was temporary; the underpinnings of the economy remain firm. Growth appears to have returned to trend growth in the first quarter. As long as the labor market continues to absorb slack, which it has, officials should be reasonably confident that core personal consumption expenditures (PCE) will move toward the Fed’s target, which it has. Inflation expectations, as measured by the 10-year breakeven, have recovered from 1.11% in mid-February to 1.55%, which is higher than when the FOMC hiked rates in December. The global capital markets have stabilized after the rough start to the year. The MSCI World Index of bourses in high income countries has risen nearly 11.5% between February 11 and March 11. The recovery in the MSCI Emerging Market equity index is even more notable. It bottomed on January 21 and since has trended 17.5% higher by March 11 and turned positive on a year-to-date basis. Another constraint that received a lot of airplay was the strength of the dollar. Since the end of January, a trade-weighted measure of the dollar has fallen by 4.6%, returning to levels seen last October. When in doubt, the Fed has erred on the side of caution: first with the tapering, then with the first hike, then with the second hike. What argues against an April hike is the absence of a press conference. Yet, Yellen has indicated that all meetings are live, and policy action can be taken without a press conference. Nevertheless, given the importance of communication, the Federal Reserve is still likely to want to explain itself. As we have argued before, a press conference after every meeting, as many other central banks do, including the ECB and BOJ, would actually create more options for the Fed. As we move into the second quarter, core inflation will likely trend gradually higher, driven primarily by shelter and medical services costs, and average hourly earnings can be expected to strengthen. Contrary to the cry that the December rate hike was folly, and the Fed would like to retract it, we expect the gradual rate hikes to continue with a move in June and one more in second half." For more information, read our latest forex news.