“A binary assessment of upcoming Fed decisions would point to a minimal but negative impact to rate expectations, yet the stronger message to emerge is that US businesses confidence is on the rise and, in the process, already helping Trump towards his 4% GDP target,” he said.
Aberdeen Asset Management senior investment manager James Athey also asserts that it will be more difficult for the Fed to justify another hike in March based off January’s payroll figures.
“This is just what the doves at the Fed wanted to see,” he stated.
“Even the headline employment number won’t help. It shows more people are in employment which you might interpret as increasing the likelihood of a hike. But at this stage in the economic cycle you’d expect the headline employment number to be slowing a bit as we’re theoretically reaching full employment. The increase in participation and drop in wages suggest we’re not at full employment.”
As a result, “financial markets are reacting with a bit of confusion,” said Athey. “Some are seeing the headline number and thinking a hike is on the cards while others are digging below the surface and concluding it might not be.”
AXA Investment Managers senior economist David Page is choosing to look beyond the noise and stick to his guns about the Fed’s movements. While he admits they will not be under any immediate pressure to hike rates in March, he remains adamant that there will be two hikes this year.
