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Alvin Liew, Researcher at UOB Group, assessed the recent figures from US Payrolls and prospects for another rate hike by the Fed.

Key Quotes

“The latest job report reinforces the outlook shared by FOMC Chair Powell and many senior Fed officials: ‘remarkably positive outlook’ for employment and inflation, significant inflation rise is not expected and wages rise does not point to overheating labor market, inflation risk. The Sep jobs report also meant that the Fed’s gradual rate hike trajectory is unchanged. Market rate hike expectations for a November 2018 hike edged higher to a still low 4.8% (from 3.4% pre-NFP release) while the probability of a December rate hike also increased marginally to 76.1% (from 75.9% pre-NFP), based on trading in futures and options data compiled by Bloomberg (WIRP)”.

“We maintain our Fed rate trajectory in 2018 and we continue to expect one more hike for this year (Dec 2018 FOMC) to bring the FFTR range to 2.25%-2.50% by end-2018. We also maintain our 2019 rate hike expectation at three 25bps hikes which implies that we expect the Fed to exceed their long run FFTR of 3.0% by mid-2019. The Fed’s balance sheet reduction (BSR) program is also expected to continue as scheduled”.