According to Chief Economist Jans Hatzius at Goldman Sachs, Feds will hike interest rate in 2016, especially after today’s Nonfarm Payroll which showed strength in the US labor market despite of a severe winter. Here are the highlights for NFP on March 7, 2014:
As we can clearly see, the pleasant surprise from the latest NFP release not only confirms Fed’s decision to continue with taper, but also adds speculations for an increased pace of tapering, especially considering how the labor market remained unfazed despite severe weather conditions that even the head of Federal Reserve Yellen herself expressed concerns in recent testimony. Seeing how the NFP surprised the market in February, it’s reasonable to expect that weather conditions in March and April will only be better, which adds more optimism to the USD, to say the least.
Going back to the subject of Fed rate hikes, here are what some Fed officials are saying:
In conclusion, all comments are pointing to a 2015 rate hike by the Feds, and aside from any unforeseeable surprises, market expectation should maintain a strong support for the USD and intensify as we approach to the end of 2014 or when taper ends. This is once again another confirmation that it’s probably more probably to expect a 110.00 on the USDJPY than 95.00 (or 1.3000 on EURUSD than 1.4500).
When Will The Fed Hike Interest Rate?
March 7, 2014 by Leave a Comment