US: NFP is the only thing that could still stop the FOMC from raising rates next week - Rabobank

In view of the analysts at Rabobank, the key event on today’s agenda is the US employment report and after the hawkish takeover in the FOMC, one might speculate that this is the only thing that could still stop the FOMC from raising rates next week.

Key Quotes

“Recall that in June 2016 markets had been prepared for a hike by the FOMC as well, but then one bad employment report only shortly before the meeting derailed that plan. But there the comparison falls short as the UK’s EU referendum also played a part.  Indeed, it is not our expectation that the employment report will be so bad that the Fed decides to hold off on a rate hike after all. Other indicators, such as the purchasing manager’s surveys, do not point to a substantial deterioration in the labour market.”

“Wednesday’s ADP report further bolstered the case for a solid non-farm payrolls, and hence the odds that something will stand in the way of a March hike are looking increasingly small. That said, the data prior to the June 2016 employment report indicated that all lights were on green as well. While the markets will mostly be looking out for the non-farm payrolls, job creation alone isn’t everything.”

“Next to the headline payrolls number, the FOMC will probably be eyeing whether the increasing number of employed Americans is leading to wage pressures. Signs that a shifting balance of power between employers and employees in wage negotiations causes faster pay rises could encourage the FOMC to keep up the hiking pace throughout the year.”