Tags: Gandel | jobs | dollar | Federal Reserve

Fortune's Gandel: Jobs Data, Strong Dollar May Keep Fed From Raising Rates in Summer

By    |   Monday, 16 March 2015 01:00 PM

 
Economists' consensus forecast is that the Federal Reserve will raise interest rates in June or July.
 
But Fortune senior editor Stephen Gandel offers several reasons why the Fed "is not going to raise rates anytime soon (or at least not as soon as June, or even this summer)."
 
  • "The job market is weaker than it looks." he writes. The unemployment rate slipped to an almost-seven-year low of 5.5 percent in February. And non-farm payrolls rose 295,000, representing the 12th straight month with a gain of at least 200,000. That's the longest such streak since 1995. But average hourly wages rose only 2 percent in the 12 months through February. And the labor participation rate totaled only 62.8 percent last month, barely above the 37-year low 62.7 percent.
  • "A strong dollar will slow exports." The greenback has risen to multi-year highs against a range of currencies in recent weeks. An ascendant dollar hurts U.S. exports by making them more expensive in foreign currency terms. It also hurts U.S. corporate earnings, both by dampening exports and by lessening the value of companies' foreign revenue when translated into dollars.
 
Many experts say the dollar's party isn't close to an end. That's because economies and monetary policy are heading in different directions in the United States and overseas.
 
"On the euro side of things, we knew that QE [quantitative easing] was going to happen, so the euro move is starting to be baked in," Christophe Caspar, chief investment officer of multi-asset solutions at Russell Investments, told The Wall Street Journal.
 
"On the dollar side, however, there are still a lot of unanswered questions around the likely timing of a rate hike, meaning that there is still plenty of potential for the buck to rise."
 
The eurozone economy grew only 0.9 percent last year, and Japanese GDP fell in two quarters last year, while U.S. growth totaled 2.4 percent.
 
So it's no wonder that both the Bank of Japan and European Central Bank are easing aggressively while the Fed considers when to raise interest rates.

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Economists' consensus forecast is that the Federal Reserve will raise interest rates in June or July. But Fortune senior editor Stephen Gandel offers several reasons why the Fed is not going to raise rates anytime soon (or at least not as soon as June.
Gandel, jobs, dollar, Federal Reserve
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2015-00-16
Monday, 16 March 2015 01:00 PM
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