economicIs There a Fed Rate Hike in the Near Future?
During the past week, comments from a Fed official increased investor expectations for a Fed rate hike this year, causing mortgage rates to move a little higher. The week’s economic data was mostly right on target and had little net effect.
On Tuesday, Fed member Dennis Lockhart gave investors the impression that the first federal funds rate hike is likely to take place soon. In essence, he said that he believes that a rate hike will be appropriate in September unless the economy significantly underperforms expectations. While other Fed officials may feel differently, investors took this as a warning to be prepared for a rate hike at the next Fed meeting on September 17.
The major economic reports released since Lockhart’s comments showed that the economy remains on track to meet his requirements for a rate hike. Wednesday’s ISM Services data revealed an unexpectedly large increase to the highest level since 2005.
Friday’s Employment data, the biggest report of the month, matched the consensus forecast across the board. The economy continued its pace of strong job gains above 200K with the addition of 215K jobs in July. The Unemployment Rate remained at 5.3%. Average Hourly Earnings, an indicator of wage growth, were 2.2% higher than a year ago.
Looking ahead, we will get more labor market data on Tuesday with the JOLTS report, which measures job openings and labor turnover rates. After that, Retail Sales will be released on Thursday. Since retail sales account for roughly 70% of economic activity, this is one of the biggest reports of the month. Industrial Production, another important indicator of economic activity, will come out on Friday. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Overall, we’ll have a better idea of how the economy is looking within the next little bit.
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