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13 Oct 2015
More evidence needed to delay Fed liftoff - Rabobank
FXStreet (Córdoba) - Philip Marey, Senior US Strategist at Rabobank explains why they have not change their call for the first rate hike by the Federal Reserve (Fed) from December to next year.
Key Quotes:
“A slowdown of employment growth below 200K does not necessarily rule out a rate hike, as long as employment growth is sufficient to reduce the slack in the labor market. In fact, the Employment Report for September, while disappointing in terms of employment growth, did show a marked decline in the underemployment rate (U6) to 10.0% from 10.3%. Meanwhile the unemployment rate (U3) remained at 5.1%, close to the FOMC projection of 5.0% for Q4.”
“While recent data suggest that US GDP growth is being dragged down by the deteriorating global economic environment, there is still sufficient momentum in employment growth to push the various labor market slack measures down to the Fed’s desired levels.”
“Speeches by FOMC participants in recent weeks show that the positions taken at the September meeting have not materially changed despite the disappointing Employment Report. If we look at the dot plot, that would mean an overwhelming majority for a December hike.”
“We think that the Fed is close to the finish line, and it will take more evidence to convince the FOMC to delay its first rate hike to next year. Obviously, if that evidence arrives, then we will change our call accordingly. In fact, we highlighted the elevated risks of a delay to 2016 well before the disappointing payrolls.”
Key Quotes:
“A slowdown of employment growth below 200K does not necessarily rule out a rate hike, as long as employment growth is sufficient to reduce the slack in the labor market. In fact, the Employment Report for September, while disappointing in terms of employment growth, did show a marked decline in the underemployment rate (U6) to 10.0% from 10.3%. Meanwhile the unemployment rate (U3) remained at 5.1%, close to the FOMC projection of 5.0% for Q4.”
“While recent data suggest that US GDP growth is being dragged down by the deteriorating global economic environment, there is still sufficient momentum in employment growth to push the various labor market slack measures down to the Fed’s desired levels.”
“Speeches by FOMC participants in recent weeks show that the positions taken at the September meeting have not materially changed despite the disappointing Employment Report. If we look at the dot plot, that would mean an overwhelming majority for a December hike.”
“We think that the Fed is close to the finish line, and it will take more evidence to convince the FOMC to delay its first rate hike to next year. Obviously, if that evidence arrives, then we will change our call accordingly. In fact, we highlighted the elevated risks of a delay to 2016 well before the disappointing payrolls.”