8 Nov 2013
Flash: Implications for the Fed – Rabobank
FXstreet.com (London) - The currency research team at Rabobank explained while the chance of a December taper has increased, they don’t believe the Fed is in a hurry, because of several reasons.
Key Quotes:
“Although employment growth is back in the Fed’s comfort zone, and unemployment may fall again in November when all government employees are counted as employed again, wider unemployment measures are still weak. If we include discouraged workers, unemployment (U4) rose to 7.8%”.
“The widest measure, U6 (which includes part-time workers who would like to work full-time), rose to 13.8%. This also explains why the Fed seems to be thinking about reducing the unemployment threshold for the first rate hike, from 6.5% to 6.0%”.
“The progress in the unemployment rate gives a picture of the labor market that is too rosy”.
“Besides unemployment, the other leg of the dual mandate is also a concern to several FOMC participants. Today’s PCE deflator fell to 0.9% (September), and the core deflator is still at 1.2%. Both are well below the Fed’s 2.0% inflation target”.
“Finally, fiscal policy deadlines in January and February are a threat to the economic outlook. If Congress does not agree on a continuing resolution by January 15, then another government shutdown will occur”.
Key Quotes:
“Although employment growth is back in the Fed’s comfort zone, and unemployment may fall again in November when all government employees are counted as employed again, wider unemployment measures are still weak. If we include discouraged workers, unemployment (U4) rose to 7.8%”.
“The widest measure, U6 (which includes part-time workers who would like to work full-time), rose to 13.8%. This also explains why the Fed seems to be thinking about reducing the unemployment threshold for the first rate hike, from 6.5% to 6.0%”.
“The progress in the unemployment rate gives a picture of the labor market that is too rosy”.
“Besides unemployment, the other leg of the dual mandate is also a concern to several FOMC participants. Today’s PCE deflator fell to 0.9% (September), and the core deflator is still at 1.2%. Both are well below the Fed’s 2.0% inflation target”.
“Finally, fiscal policy deadlines in January and February are a threat to the economic outlook. If Congress does not agree on a continuing resolution by January 15, then another government shutdown will occur”.