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.