Fed's Fischer sees 4 rate hikes in his 2016 ballpark view

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Fed's Stanley Fischer speaking on CNBC

  • Uncertainty has risen a bit
  • The levels of uncertainty have risen on North Korea and China
  • It's hard to know how significant the Chinese developments are
  • Fed will react to incoming events
  • Fed does not know enough at the moment to know how many hikes there will be in 2016
  • The Fed want's to meet its objectives without making "big messes" in the market
  • As long as inflation remains below 2% there will be a need for accommodation
  • The Fed can't be led by what markets think
  • Fed believes the market is underestimating the path of hikes

    • That last comment is hawkish but the rest is pretty much standard fare

  • Doesn't see Fed on a course to using negative rates
  • As oil and the world stabilises the inflation trend will rise
  • Oil decline and the appreciation of the dollar won't go on forever

Not a believer in the "trend is your friend" motto then

 

Strong U.S. wage growth boosts chances of Fed rate hikes An acceleration in U.S. wage growth reinforces the Federal Reserve's view that inflation is poised to rebound and could lead the central bank to raise rates more this year than many investors expect.

While average hourly earnings were flat in December, they were sharply higher than a year earlier and rose at a 2.5 percent annual rate in the fourth quarter, according to Reuters calculations of Labor Department data released on Friday.

Wage growth remains tepid compared to before the 2007-09 recession, but an upward trend is now more clearly coming into view, supporting the outlook within the Fed that four quarter-point rate hikes could be needed this year.

The average hourly wage rose 2.2 percent in 2015, up from 2.1 percent the prior two years and 1.9 percent in 2012. Wage growth was particularly strong in the second half of 2015, which could increase confidence the persistently low inflation could rise toward the Fed's 2 percent target this year.

Also boosting the case for raising rates, Friday's data showed U.S. job growth accelerated in the fourth quarter despite trouble in manufacturing caused by a weak global economy, while more workers flooded into the workforce and the jobless rate held at a 7-1/2 year low at 5 percent.

"With the Fed feeling confirmed in its baseline scenario, the next rate increase is only a matter of time. We expect the Fed to move at the March meeting," said Commerzbank (DE:CBKG) economist Christoph Balz.

Investors had been doubting the Fed's resolve to raise interest rates, betting on fewer increases this year. But signs of strength in the U.S. economy is changing that view.

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