8 Dec 2014
Expect a Fed rate hike mid-year 2015 – SG
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Research at Societe Generale, anticipates the Fed to hike rates mid-year 2015, even if the inflation is under control, while noting that the recent US payroll data has the market arguing about the best time for a rate hike.
Key Quotes
“Friday's US payroll data add another log to the fiery argument about whether the Fed should hike rates when it's safe to do so, or only when inflationary warning lights are flashing. If the former, they need to get a move on. If the latter, we can afford to keep on waiting and see how a repeat of 2008 feels. “
“Next week will see the release of some very low inflation prints, while last week's numbers confirm that the labour market is in good shape. At one level, not a lot changed. Year-over-year employment growth accelerated from 1.96% to 1.99%, both of which are above long-term trends.”
“Wage growth accelerated from 2.0% to 2.1%, which is the average of the last 5 years. But while wage growth is going sideways, the strongest sector is leisure and hospitality which is also the lowest-paid sector in the US and one of those least subjected to effects of globalisation and technology. This sector saw wages fall after the recession and has long lagged the average, but is finally responding to falling unemployment. This could signal at least a modest pick-up in wage growth in the months ahead and certainly will support spending while 2% employment growth underpins GDP growth too.”
“We still expect the Fed to hike mid-year, even if inflation is very well behaved.”
Key Quotes
“Friday's US payroll data add another log to the fiery argument about whether the Fed should hike rates when it's safe to do so, or only when inflationary warning lights are flashing. If the former, they need to get a move on. If the latter, we can afford to keep on waiting and see how a repeat of 2008 feels. “
“Next week will see the release of some very low inflation prints, while last week's numbers confirm that the labour market is in good shape. At one level, not a lot changed. Year-over-year employment growth accelerated from 1.96% to 1.99%, both of which are above long-term trends.”
“Wage growth accelerated from 2.0% to 2.1%, which is the average of the last 5 years. But while wage growth is going sideways, the strongest sector is leisure and hospitality which is also the lowest-paid sector in the US and one of those least subjected to effects of globalisation and technology. This sector saw wages fall after the recession and has long lagged the average, but is finally responding to falling unemployment. This could signal at least a modest pick-up in wage growth in the months ahead and certainly will support spending while 2% employment growth underpins GDP growth too.”
“We still expect the Fed to hike mid-year, even if inflation is very well behaved.”