Ongoing strength in the labor market is another factor that the Fed is taking into account as a likely reason to mark up its projections for rates, according to Marc Giannoni, chief US economist at Barclays Plc in New York.
He pointed to monthly data on job openings published before the November meeting, which had suggested a drop in labor demand, versus data published after the meeting that indicated job openings were rising again.
“So far, we’ve seen fairly robust readings,” Giannoni said. “That shows still a lot of momentum in the labor market.”
Investors now expect the Fed to opt for a half-point rate hike at the December meeting, bringing the target range for the benchmark to 4.25% to 4.5%, with rates peaking next year around 5%, according to prices of contracts in futures markets. That compares with a 4.5% to 4.75% peak in the Fed’s September projections.
Two policymakers -- Cleveland Fed President Loretta Mester and her San Francisco counterpart, Mary Daly -- reinforced those expectations in public comments Monday.
“I don’t think the market expectation is really off,” Mester said during an interview on CNBC. Daly told reporters after an event in Irvine, California that “5%, to me, is a good starting point” for how high rates need to go to restore price stability.
This article was provided by Bloomberg News.