■ US job statistics published on Friday afternoon were strong …
■…which should encourage the Fed to take action
US employment figures were released on Friday afternoon. Altogether, 271,000 jobs were created in October, pushing down the unemployment rate to 5%. Wage growth has also accelerated, up 0.4% in the month of October and 2.5% year-on-year. These figures were highly awaited given the importance of the first monetary tightening move in the US, the timing of which has been a real cliffhanger for the markets. As to the current monetary cliffhanger, we’ve been talking about it for months, and the question of its timing is getting old: in the end, the difference between December 2015 or March 2016 won’t be so great as all that…
In contrast, it is high time we look at a more pressing question: what message will accompany the Fed’s tightening move? By definition, an initial rate increase is followed by others, so indications about the pace of tightening are now much more important than the timing of the first turn of the screws. The market is forecasting a Fed funds target rate of about 0.75% by the end of 2016. Any indication that Janet Yellen and her colleagues at the Fed might be looking to adopt a faster pace would confuse market operators around the globe.
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by William DE VIJLDER