No rate hike in March?

9 February,, Lagos – Even with mounting fears that the Federal Reserve may put off further rate hikes for longer than expected, some analysts believe the potential for the next rate hike in March has received a boost from Friday’s jobs report.

NFP figures

The report showed 151,000 jobs added, which is less than expected. The fall in the hiring figure largely reflects the usual drop after seasonal hiring pickup in the final two months of the year. However, the high point of the report however is the unemployment rate. The jobless rate fell to an almost 8-year low at 4.9%, as the resilient labor market conditions continue to stir wage growth. Hourly earnings also advanced more than forecast following a rise to the highest since July 2009.

How NFP affects Fed rate decision

According to Wells Capital Management’s James Paulsen, the jobs report helped calm fears of a recession, which could now prompt the Fed to hike rates sooner than expected. Appearing on CNBC he stated “I think it very much puts the Fed back in play for March perhaps in terms of tightening.”

This comes amid fears that the central bank may put off further tightening for now due to ailing economic conditions, therefore hurting the prospect of rate hike in March. Back in December, the fed signaled that it intended to raise rates four times this year, with most market participants believing the Fed will only raise rates twice or three times. After the rate release, the dollar strengthened, Treasuries sold off and stocks fell as the market digested the possibility of a March interest rate hike.

Some of the Fed committee members, like Billy Dudley said that financial conditions have tightened since the recent interest rate hike in December, and additional strength of the U.S. dollar could have significant consequences for the U.S. economy.

Supporting Dudley’s perspective, Lindsey Piegza, Stifel Fixed Income chief economist thinks the economy is not on solid footing. She clarified that the Fed will likely continue to raise despite the weakness in retail and business spending and productivity.

“I think it’s very clear that the economy is not on sound footing, but from the Fed’s perspective, they seem to be ignoring the current slew of very disappointing trends in the economy, focusing instead on cherry picking the data and expectations of further growth longer term,” she said.

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