This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/2017/mar/10/us-jobs-report-signals-fed-will-raise-interest-rates
The article has changed 3 times. There is an RSS feed of changes available.
| Version 0 | Version 1 |
|---|---|
| US jobs report means Fed rate hike is a bolt-on certainty | |
| (about 3 hours later) | |
| The latest US jobs report removes any lingering doubts about whether the Federal Reserve will raise interest rates next week. | The latest US jobs report removes any lingering doubts about whether the Federal Reserve will raise interest rates next week. |
| Following news that the world’s biggest economy generated 235,000 net new non-farm jobs in February, it is a bolt-on certainty that the central bank will push up the cost of borrowing by a quarter of a point. | Following news that the world’s biggest economy generated 235,000 net new non-farm jobs in February, it is a bolt-on certainty that the central bank will push up the cost of borrowing by a quarter of a point. |
| It is now almost 10 years since the start of the financial crisis ushered in a period of ultra-low interest rates and it has been clear for a while that the Fed is anxious to speed up the normalisation process. A healthy labour market is the key to that process and it would have taken a shockingly bad report to stay the bank’s hand. This was not it. | |
| Indeed, the financial markets have already moved on from next week to musing about how many more times the Fed will tighten during the course of 2017. The feeling is that two more rate hikes are in prospect. | Indeed, the financial markets have already moved on from next week to musing about how many more times the Fed will tighten during the course of 2017. The feeling is that two more rate hikes are in prospect. |
| It certainly seems unlikely that next Wednesday’s rise will be the end of the matter. The report from the Bureau of Labour Statistics showed employment up by more than the 190,000 expected by Wall Street and unemployment at 4.7%. Annual wage growth is running at 2.8%. | It certainly seems unlikely that next Wednesday’s rise will be the end of the matter. The report from the Bureau of Labour Statistics showed employment up by more than the 190,000 expected by Wall Street and unemployment at 4.7%. Annual wage growth is running at 2.8%. |
| Policymakers at the Fed will look at this data and conclude that inflationary pressures are building as the economy approaches full employment. With US productivity so weak, the central bank will certainly be tempted to move again if and when earnings growth hits 3%. | Policymakers at the Fed will look at this data and conclude that inflationary pressures are building as the economy approaches full employment. With US productivity so weak, the central bank will certainly be tempted to move again if and when earnings growth hits 3%. |
| There was plenty for Donald Trump to welcome. A mild winter has resulted in a big increase in construction jobs. Manufacturing employment was also up. The only weak spot was retailing. | |
| The new president has plans for a big package of tax cuts and spending increases but fiscal easing will mean more aggressive tightening from the Fed, which is already starting to fret about the risks of the economy overheating. | The new president has plans for a big package of tax cuts and spending increases but fiscal easing will mean more aggressive tightening from the Fed, which is already starting to fret about the risks of the economy overheating. |
| A couple of things are worth noting. Even after the much-anticipated move next Wednesday official interest rates in the US will still be below the current core inflation rate of 2.3%. Monetary policy will continue to provide a stimulus, just not as big a boost as previously. | |
| What’s more, the normalisation of interest rates doesn’t mean they are going to return to their pre-crisis level of around 5%. The next peak is likely to be half that level. |