During the Jackson Hole Symposium, the Federal Reserve chair, Janet Yellen, already hinted that if the August jobs report provided a strong performance, there was a chance for a rate hike during its September 2016 meeting.
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KEEPING SCORE: Japan’s benchmark Nikkei 225 added 1.2 percent to 17,129.68 in the morning session.
“Words move markets, words can be misinterpreted, words can have effects in people’s 401 (k) s, their pension funds, their stock portfolios”. The US elections culminate in November, at which point the Fed would have all the clarity it needs from Washington to take the economy forward under the new government. Tough talk from the Fed is nothing new, but there may be some new thinking behind it now (more on that in a minute). “That usually supports the risky assets like the high-yielding currencies” of Australia and New Zealand, he said. With the unemployment rate back to its pre-crisis level and inflation slowly moving toward the Federal Reserve’s two percent target, worldwide investors and central bankers expect the rate to move to around three percent from the current 0.5 percent over the next two to three years. The Fed’s labour-market conditions index also fell in August, slipping back into negative territory after a positive reading in July.
The August jobs report indicates an improvement in job growth.
United States nonfarm employment climbed by 151,000 last month, compared with a median forecast of 180,000 in a Bloomberg survey.
The weak data poured cold water on expectations of an early rate hike in the world’s largest economy. “With markets losing direction after the U.S.jobs data fell short of adding fuel to USA rate hike expectations this month, Kuroda’s comments were neither supportive for aggressive selling nor for buying of the dollar”. But what if the Fed has finally come to the conclusion that monetary policy can’t influence the labour market as much as it had hoped?
We will not be surprised to see an extension to the current quantitative easing programme to beyond the spring of next year.
She’s a low interest-rate person, she’s always been a low interest-rate person … and I must be honest, I’m a low interest rate person. Goldman Sachs economist gives a 55% probability to a September Federal Reserve rate hike.
“This is a unsafe period where the chances of a surprise are growing”, said Jamieson. The next USA central bank policy meeting is set to happen on September 20-21.
CURRENCIES: The euro strengthened to $1.1165 from $1.1149, and the dollar fell to 103.29 yen from 103.45 yen. The anecdotal read on the 12 Fed districts also found that labor markets had continued to tighten, even with “fairly modest” wage pressures, and that energy markets had seen signs of stabilization.
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