Fed On Track to Raise Rates in December

The Federal Reserve is expected to start raising rates at its December 2015 meeting, as long as incoming data continues to show the economy is resilient. Yet, markets seem to have anticipated the monetary tightening for some time as most housing and labour market indicators continue to show an improvement. However, the inflation outlook remains subdued as oil prices remain at a 6-year low.

The inflation rate has been below the Fed’s 2 percent medium-term target since August last year. The highest downward pressure comes from falling oil prices while housing cost has been risng since 2012 and wage growth stayed above the inflation rate since the beginning of last year.

The labour market has been strengthening: initial jobless claims have been below 300,000 since March, nonfarm payrolls and average weekly working hours increased to a pre-financial crisis level while unemployment rate fell to nearly 7-year low of 5 percent in October.

The economy have been growing at an average annualized rate of 2.61 percent on quarter in the last two years. In addition, the dollar have been strengthening, the Dow Jones remins on the upward trend and yields on 10-year government bonds stay below pre-financial crisis level. 

Joana Taborda | joana.taborda@tradingeconomics.com
11/26/2015 7:18:52 PM