FXStreet (Delhi) - Tony Kelly, Senior Economist at NAB, notes that there is still solid underlying momentum in the economy despite the slowdown in U.S. GDP growth in the September quarter. Key Quotes “The likelihood of a fed funds rate hike in December has increased. Subsequent hikes will be gradual.” “Manufacturing continues to struggle, due to dollar apprecation and, more recently, an inventory correction.” “While U.S. GDP growth slowed noticeably in the September quarter to 1.5% qoq annualised (from 3.9% annualised in the December quarter), the economy still appears to have solid underlying momentum.” “More recent data – in particular the ISM business surveys and the October employment report – support the view that the economy remains on a sound footing, but that not all parts of the economy are equally strong.” “The net gain in non-farm employment, of 271,000, was the strongest reading for the year. The annual growth rate in employment, which removes a lot of the month-to-month volatility, is 2.0% which is well above growth in the labour force (0.5% yoy) and working age population (1.2%). The unemployment rate also fell to 5.0%, its lowest level since April 2008.” “The rise in the US dollar at least in part reflects the anticipated formal tightening of U.S. monetary policy through increases in the fed funds rate.” “Given the combination of tailwinds and headwinds, we expect that the economy will continue to grow at a moderate rate, with growth in 2015 and 2016 anticipated to be similar to that experienced last year (at around 2½%). Growth at this pace will lead to further falls in the unemployment rate, resulting in a build up of inflationary pressures which should move inflation back towards the Fed’s 2% target.” For more information, read our latest forex news.