Fed ready to hike in December – UOB

Following Friday’s payrolls figures, Strategists at UOB Group assessed the prospects for further tightening by the Fed by year-end.

Key Quotes

“The surprise drop in September’s headline figure was largely due to temporary disruption from weather factors, and is unlikely to distract the US Fed from raising the US Fed funds rate in December, nor its balance sheet reduction (BSR) process. Other indicators such as earnings continue to point to a labour market that is still on upward momentum which would strengthen the case for the US Fed”.

“Indeed, US financial markets have largely shrugged off the NFP report and focused ahead on US Fed and US President Trump’s tax reform policy”.

“Across Friday, various US Federal Reserve officials, including New York FED President William Dudley, Atlanta FED President Raphael Bostic, St Louis FED President James Bullard and Dallas FED President Robert Kaplan all gave their obligatory comments on the outlook of interest rates in the US. In general, all of them kept to their respective hawk vs dove script, but the general consensus remains that a December rate hike remains strongly in the offering. As such, futures implied probability of a December rate hike remains high at around 80%”.