US bonds lag behind Fed rate forecasts

A healthier looking jobs market, however, is not yet sparking inflation. Indeed, the recent slide in energy and commodity prices in conjunction with a rising dollar is seen pushing inflation further below the central bank’s target of 2 per cent.

“The Fed talks about June to September being the window for a move in policy,” says Lou Crandall, economist at Wrightson Icap, who expects a key measure of core inflation followed by the Fed will run at an annual rate of 1 per cent by June, down from the current level of 1.3 per cent.

“The Fed needs a solid basis for forecasting a return to 2 per cent inflation, and it is difficult to see the case for such a forecast coming together as early as June,” he adds.