If November employment data is below projections, or if October readings are revised down to a considerable degree, then there is a weaker case for Yellen to continue her relatively hawkish rhetoric. The economy added 271,000 jobs last month according to the official jobs report released Friday by the Bureau of Labor Statistics (BLS). Investors and analysts will see more earnings and revenue on quarterly reports. Under higher interest rates, banking stocks will move in an upward trajectory.
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Over the past few years, Citigroup has been able to perform better than its peers, mainly in terms of operational efficiency.
Fed analyst and University of Oregon Professor Timothy Duy recently wrote that a Fed rate hike is becoming likelier even as it is counterproductive.
The good news is that the economy is creating jobs at the fastest pace since the Clinton administration. Inflation continues to be at about 0.15%.
As far as where to invest, right now the dollar looks attractive as inflation is muted and global monetary policies particularly between the Federal Reserve and the European Central Bank are diverging. With global terrorism on the rise and seemingly insurmountable challenges facing every economy, the world today has more than its fair share of troubles.
What’s interesting is that investors aren’t just fleeing; they’re starting to position for the new era. There was notable growth in construction, which added 31,000 new jobs and served as a further vote of confidence to the USA real estate recovery, and in retail, which added 44,000 new jobs and was a bullish signal for the upcoming holiday-shopping season. For what’s left of its credibility it now has to move rates up in December on the basis that, given what it has said in the recent past, if it ain’t going to hike in December, when is it? The Fed’s revised wording in its latest policy statement had indicated that it was poised to raise its policy rate at its next meeting if the USA economic data continued to show encouraging signs.
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There is a possibility that it can cut interest rates into the negative territory, similar to what other countries have done. However, this isn’t the conventional way of dealing with such a problem. Amid this backdrop are lingering doubts about the direction of the Federal Reserve.
The Federal Reserve now has an option where they can increase the interest paid on excess reserves.
Consumer spending has been driving USA economic growth. Nonetheless, Colquhoun warns that rising rates will push borrowing costs higher in a region that has turned to debt to fuel growth as trade ebbs. That’s an idea that is profoundly scary, rightly or not, to many in financial markets, especially given the sheer weight of money now sitting in very low-yielding instruments, or in strategies which depend on low yields to make their own mechanics work. However, it later resulted in the financial crises of 2008.
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However, it will be pointed out that the proportion of Americans who are in the labour force, which fell to a 38-year low reading of 62.4% for September, was unchanged last month. The 12-month consensus target price is $63.72, representing a return potential of around 14% over its last quoted price.
