Last
Wednesday, in her statement to a congressional panel on banking supervision,
the Chair of the Federal Reserve, Janet Yellen, let it be known that a rise in
core interest rates in the US was firmly on the cards for December. However,
there was an important caveat in her words. She also said:
“ … and
if the incoming information supports
that expectation, then our statement indicates that December would be a
live possibility” (emphasis added), before going on to say that “of course”
they had not yet made a decision.
It is well
known that the primary mandate of the Federal Reserve is the growth and
sustainability of jobs in the US. Looking at the chart above, the overall trend
in Non-Farm payrolls seems to be down over the past 12 months. And there are
two more NFP reports to come before the December FOMC meeting, the one due later
today and another on December 4th.
Fed is not out of the woods yet
Some of the ‘incoming
information’ that Ms. Yellen and her colleagues are monitoring came in
yesterday. Both initial and ongoing jobless claims were worse than expected,
showing that more people are seeking unemployment assistance than had been the
case a week previously. In addition, Unit Labour Costs, a measure of the
strength of employee power, had not risen as much as had been expected. The
FOMC has let it be known that measures such as this are important to them in order
to gauge the strength of any increase in workforce participation.
So the Fed
is not out of the woods yet. There may be more twists to the tale before we get
a definitive answer to the question of forthcoming interest rate rises in the
US.
No comments:
Post a Comment