Back
8 Jan 2015
Fed becoming more confident for a rate hike – BTMU
FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, notes that yesterday’s ADP numbers points towards another year of solid employment growth in the US, and hence believes the that Fed is becoming more confident regarding raising rates as the US economy moves closer to estimates of full-employment.
Key Quotes
“The ADP survey estimated that the US economy likely added another 241k private sector jobs in December which has reinforced investor expectations for another robust non-farm payrolls report for December. The US economy is likely to have added close to 3 million jobs in 2014 recording its strongest year of job growth since 1999.”
“We expect another year of solid employment growth this year even if there is some moderation as a result of the dampening of the shale oil boom which has boosted employment. Another year of solid employment growth should help to lower the unemployment rate towards the Fed’s longer-run estimate of 5.2% to 5.5%.”
“As a result the Fed is becoming more confident about the need to begin gradually raising rates as the US economy moves closer to estimates of full-employment.”
“The release of the latest FOMC minutes overnight from their 17th December meeting reinforced our view that the Fed remains on course to begin raising rates from the middle of this year.”
“The minutes revealed that even “with lower energy prices and the stronger dollar likely to keep inflation below target for some time, it was noted that the Committee might begin normalization (of interest rates) at a time when core inflation was near current levels”. The statement highlights again that the current low level of inflation is unlikely to deter the Fed from raising rates in the year ahead.”
Key Quotes
“The ADP survey estimated that the US economy likely added another 241k private sector jobs in December which has reinforced investor expectations for another robust non-farm payrolls report for December. The US economy is likely to have added close to 3 million jobs in 2014 recording its strongest year of job growth since 1999.”
“We expect another year of solid employment growth this year even if there is some moderation as a result of the dampening of the shale oil boom which has boosted employment. Another year of solid employment growth should help to lower the unemployment rate towards the Fed’s longer-run estimate of 5.2% to 5.5%.”
“As a result the Fed is becoming more confident about the need to begin gradually raising rates as the US economy moves closer to estimates of full-employment.”
“The release of the latest FOMC minutes overnight from their 17th December meeting reinforced our view that the Fed remains on course to begin raising rates from the middle of this year.”
“The minutes revealed that even “with lower energy prices and the stronger dollar likely to keep inflation below target for some time, it was noted that the Committee might begin normalization (of interest rates) at a time when core inflation was near current levels”. The statement highlights again that the current low level of inflation is unlikely to deter the Fed from raising rates in the year ahead.”