Yellen said December remains a “live possibility” for a rate increase, and William Dudley, the president of the NY Fed and a permanent voting member of the Fed’s policy panel, said later that he would “completely agree” with Yellen.
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Investors are now looking to Friday’s October US nonfarm payrolls report for guidance as to what the Fed will eventually do at its next monetary policy meeting in mid-December.
Gold has fallen to a seven-week low as the U.S. dollar hit a three-month high, and looks vulnerable to further losses after Federal Reserve officials left the door open to a USA interest rate rise in December.
The odds the Federal Reserve will raise interest rates in December for the first time in in nine years just got a lot higher.
She said the decision on hiking interest rates in December will depend on the Fed’s policy arm’s assessment of the economic outlook at that time and “that assessment will be informed by all of the data that we received between now and then”.
The British pound fell 1.2 percent on Thursday, its biggest drop since late August, after the Bank of England’s governor dismissed the view it would raise interest rates shortly after the Fed.
The rate has been locked extraordinarily near zero since 2008 to foster economic growth.
“The remaining issue is whether the rate hike extent would be drastic or gradual”, he said.
“If employment numbers come in roughly close to expectations, the odds of a Fed rate hike will increase dramatically”, said Mark Heppenstall, a portfolio manager at Penn Mutual Asset Management.
Yellen’s comments pushed the USA dollar higher, which caused oil prices to fall, which in turn affected the stocks of oil, gas and energy companies. Analysts said the data made prospects of a rate hike even more certain. Against the greenback it is down a few 5.4 per cent.
O’Sullivan, who projected October payrolls would exceed 200,000, added that based on other indicators, “job growth is strong”.
Asian shares slipped on Friday as investors braced for US employment data that is expected to bolster the case for a Federal Reserve interest rate increase as early as next month.
The Standard & Poor’s 500 fell 0.4 percent to 2,102.31 and the Nasdaq composite 0.1 percent to 5,142.48.
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The USA dollar traded flat against major world currencies, with the euro slightly higher near $1.087. Average hourly earnings climbed 2.5% year-over-year, also better than consensus and the best number since July, 2009.
