“Minutes to December’s FOMC saw a Fed clearly concerned about the prospect of a marked undershoot of the unemployment rate. While this risk remains, the increase in unemployment removes the immediacy of this threat, while earnings growth continues to question the tightness of the labour market. While activity indicators remain encouraging, lack of urgency in these data should allow the Fed to leave policy unchanged in March and assess the broader development of the administration’s fiscal package in the run up to the June meeting. We maintain our forecast for a June rate hike. We still consider two hikes the most likely this year, although we concede that risks appear to be tilted towards a third.”
Royal London Asset Management economist Ian Kernohan is also of the opinion that the January employment data has not derailed the Fed’s plans in any meaningful way.
“The latest payroll numbers suggest that the US economy had a solid start to the year,” said Kernohan.
“A combination of strong employment growth and modest wage pressures, should allow the Fed to continue with its plan of gradual interest rate rises. We expect a further increase during the second quarter.”
