Saturday August 1, 2015 - 11:22:47 GMT
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Latest Fed Meeting Has Some Expecting An Early Fed Lift-Off
John M. Bland
Fed Discloses Rate Hike Criteria
It took a while for the markets to digest the latest Fed decision, but as we had expected, once the Fed experts had read the tea leaves, most came to the conclusion that the central bank is leaning in the direction of a rate hike at its September 15-16 meeting. A key item in its policy statement was:
"...The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term..."
Earlier in the statement, the central Bank indicated that:
"...The labor market continued to improve, with solid job gains and declining unemployment. On balance, a range of labor market indicators suggests that under utilization of labor resources has diminished since early this year."
Before the FOMC makes its final decision in September, it will have seen the July and August employment reports. All they will need is for the current strength of of the labor markets to be confirmed. As for the inflation picture, it appears that the central bank is happy to accept its forecasts for inflation rather than actual data, although a weak earnings report Friday (ECI) has raised fresh concerns about weak wages.
My Outlook For September
This Friday will see the release of July employment data, this will be one of the key factors in the Fed policy decision in September. As for Chair Yellen, I believe she would rather act sooner and raise rates more cautiously than to act later and raise rates more rapidly. Indeed, The July FOMC might prove to be historic as we indicated it could be a week ago.
The upcoming week is an active period one for major economic data.
-- Monday, August 3, Holiday for Canada, Global Manufacturing PMI's, US- Personal Income & PCE Deflator.
-- Tuesday August 4, Reserve Bank of Australia Decision, UK Construction PMI.
-- Wednesday August 5, Global Service PMIs, Eurozone Retail Sales, US- ADP Private Jobs and Trade.
-- Thursday August 6, Australia Employment, U.K. Production, Bank of England Decision.
-- Friday August 7, Bank of Japan Decision, German and U.K. Trade, Canadian and U.S. Employment.
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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