If You’re Going to Hike Rates Based on Employment, You Might As Well Do It Now

Posted Thursday, October 13, 2016 by
Skerdian Meta • 1 min read

We all know that the central banks take many things into consideration when the decide to take the next step up or down when it comes to monetary policy. The FED is not an exception. But they exclusively atributed their next rate hike to the labour market. 

It's not that the other sectors of the US economy are in a terrible shape, but they don't warrant an interest rate hike right now. They have been unstable, particularly the manufacturing sector and inflation. Only a few weeks ago the market had a little moment of panic after the US economic data posted some horrible numbers. So, the only sector which has been rock solid is employment.

But if that's the case, then why not hike them now. The unemployment claims declined today to just 246k which is the lowest level, probably since the 2008 financial crisis. Last week's numbers were revised down to 246k as well and the 4 week moving average is getting close to 250k. Now, that's as good as these numbers get, we can't expect anymore fireworks.

So according to the logic the FED is following, they might as well raise the interest rates now. Unless the world falls apart, I don't think anything substantial enough will change in the labour market in the next two months. If anything, it's only expected to get better. Anyway, they decided to postpone the next rate hike until December. Hopefully, they don't miss another good opportunity like they have done many times in the last few years.


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