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The Federal Reserve is still on track for two rate hikes this year and isn’t worried about the lacklustre growth of Q1, Desjardins says in an economics note.

Desjardins says it expects two 25 basis point hikes, one in June and one in September—which are sooner than previously expected.

U.S. real GDP came in at an annualized pace of just 0.7% in Q1, dragged down by weak consumption and modest stock growth, though the financial group expects it to rebound this spring.

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“Federal Reserve leaders do not seem to be worried about the U.S. economy’s weak first-quarter growth, as the jobless rate has already dropped below where they expected it to be at the end of 2018,” Desjardins writes in the note issued Thursday.

It expects the recent upswing in North American bond yields to continue in the coming months and has upgraded Canada’s 2017 growth forecast to 2.6% from 2.4%.

“In Canada, recent events are consistent with our scenario of a first key rate increase in April 2018,” Desjardins says. “In the meantime, the Canadian dollar should stay close to where it is, as widening rate spreads with the United States should be offset by an upswing by oil prices and the waning of some concerns about Canada’s economy.”

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Originally published on Advisor.ca

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