Fed set to hike at December meeting - Danske Bank

According to analysts from Danske Bank, the Federal Reserve will deliver a rate hike at next week meeting, even if Friday’s jobs report disappoints. 

Key Quotes: 

“We expect the Fed to hike at its next FOMC meeting on 12-13 December. Even if we get a disappointing jobs report, this is not likely to change the Fed’s intention to hike. Hence, the jobs report should not be a major market mover this time around. This has also been the norm during recent months where jobs reports have not had a significant effect on e.g. EUR/USD. This indicates that the market does not believe that a single number will change much in Fed policy decisions.”

“Despite weak inflation and subdued wage growth, the Fed still thinks it is appropriate to hike rates, as Yellen still has a strong belief in the Phillips curve mechanism (tighter labour market will push up wage growth and hence inflation eventually). We expect no major changes in the interpretation of the labour market and its impact on Fed policy under Fed chair nominee Powell, as he has said that he thinks it is appropriate to continue the gradual hiking cycle. However, where uncertainties still remain is about how he will react in the case of an adverse shock to the economy.”