Fed rate hike saga

Fed’s Yellen, in her speech. yesterday refrained from hinting at a possible rate hike in coming months. A significant majority in the market was expecting Yellen to say so.

Moreover, Friday’s non-farm payrolls report was being called/or is still being called as a one-off kind of a data. however, people conveniently forget that the report carried significant downward revisions to previous month’s NFP figure.

But Yellen did warn markets not to attach too much importance to labor data alone and took note of healthy rise in wages.

So the question arises is whether Fed will hike rates – My take on this is – Yes, Fed will hike rates and that would happen in December if – June payrolls report does not show a significant improvement. This is irrespective of whether Britain votes in favor of Brexit or against Brexit.

If June NFP report is super strong on all fronts, Fed may push the button in July, mainly because stock markets also appear posied for another rate hike.

 

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