4 Aug 2015
Fed: maybe six weeks from hiking - BBH
FXStreet (Guatemala) - Analysts at Brown Brothers Harriman explained that the Federal Reserve could be six weeks away from raising rates.
Key Quotes:
"The FOMC statement from the end of last month appeared to have lowered the bar of a move. It called the recent improvement in the labor market as "solid" and wanted to see "some" more.
The Bloomberg consensus increase of 225k increase in the July nonfarm payroll report to be released Friday surely qualifies as "some" improvement, especially if reinforced by other details of the report. Average hourly earnings are expected to return to 2.3% year-over-year, where they were in April and May. This matches the August 2013 high and the July 2011 high, which are the fastest pace since 2009.
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The market is not as convinced as economists are that the Fed will, in fact, raise rates next month. In terms of inflation expectations, the Fed recognizes two distinct signals. The first is market-based measures, which have softened. The second is surveys, which show expectations are steady. For the past several months, the Fed has put more stock in the survey results.
Similarly in terms of Fed expectations, surveys show a large majority (a little more than 80%) of economists expect a hike in September. One of the most direct market measures, the September Fed funds futures contract, has a slight bias against a hike."
Key Quotes:
"The FOMC statement from the end of last month appeared to have lowered the bar of a move. It called the recent improvement in the labor market as "solid" and wanted to see "some" more.
The Bloomberg consensus increase of 225k increase in the July nonfarm payroll report to be released Friday surely qualifies as "some" improvement, especially if reinforced by other details of the report. Average hourly earnings are expected to return to 2.3% year-over-year, where they were in April and May. This matches the August 2013 high and the July 2011 high, which are the fastest pace since 2009.
Register to the live coverage and trade the NonFarm Payrolls with Bednarik, Pinkert and Elam. We are Forex!
The market is not as convinced as economists are that the Fed will, in fact, raise rates next month. In terms of inflation expectations, the Fed recognizes two distinct signals. The first is market-based measures, which have softened. The second is surveys, which show expectations are steady. For the past several months, the Fed has put more stock in the survey results.
Similarly in terms of Fed expectations, surveys show a large majority (a little more than 80%) of economists expect a hike in September. One of the most direct market measures, the September Fed funds futures contract, has a slight bias against a hike."