The FED Gets the Green Light From US Retail Sales
The FED has been itching to hike the interest rates for ages now, but one obstacle or another have been getting in the way since the last rate hike in December last year. First it was the winter slowdown which is not unusual in the US, then the financial markets went through a period of panic in February, followed by the Brexit vote and the big finale that happened last week.
Now the FED has made up its mind and today's retail sales were the last indicator to go their way. Even Rosengren who is one of the most dovish members among the FED doves confirmed today that there's no reason to delay rate hikes further.
In my opinion, if they let this chance slip through their fingers, then the FED will end up like two years ago when they hesitated to take that step. Soon after everything turned sour and they were forced to postpone it for more than a year.
Now everything has lined up perfectly, US elections are over, a generous fiscal plan is coming from the new administration, the global economy is in a much better place and the US economic data has been showing an acceleration of the recovery.
A couple of hours ago the US retail sales and core retail sales for October jumped by 0.8%. That's respectively 2 and 3 points above expectations and it's actually a very good reading. As Rosengren said, something extremely bad has to happen for the FED to stay on hold in December. World war springs to mind?
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