Tags: ron insana | federal reserve | rate hike | economy

Ron Insana: Job Report May Tip Fed's Hand on Rates

Ron Insana: Job Report May Tip Fed's Hand on Rates
Ron Insana (roninsana.com)

By    |   Thursday, 06 August 2015 08:12 AM

CNBC contributor Ron Insana says that Friday’s jobs report may be the final impetus the central bank needs to finally start raising interest rates. But only if it the report isn’t weak.

Friday's report from the Labor Department is expected to show a gain of 223,000 jobs added to nonfarm payrolls, according to a Reuters survey.

“It seems as if the Fed signaling its intentions is enough to achieve the result of tightening credit market conditions — without actually raising rates,” he wrote in a commentary for CNBC.

“The Fed is expected to raise rates in September, but the intensifying crash in commodities, the weakening global economy, market disruptions in China and Greece, weak wage growth in the U.S. and a coming decline in headline inflation could all stay the Fed's hand,” he said.

The Fed has kept its short-term interest rate near zero since December 2008. A report last week showing wage growth stalled in the second quarter cast doubt that the U.S. central bank would hike rates at its September policy meeting, Reuters reported.

“The emerging question for the Fed, however, is whether or not the Fed's increasing transparency, jawboning and hints of a coming rate hike, are all effectively pre-empting the Fed's ability to take that first step toward raising rates for longer than we currently anticipate,” he wrote.

“The outcomes are now binary. Either the Fed concludes that the economy, and the markets, are stable enough to withstand liftoff and, thus, raise rates sooner rather than later. Or, the Fed waits until all of its economic goals are unambiguously achieved — a moment that could be months, if not years, away,” he wrote.

“This is a frustrating exercise for the Fed, no doubt, but equally frustrating for market participants, who are watching the Fed attempt to push the boulder (rates) up the hill, only to have it roll back down again.”

And the Fed rate hike is far from a certainty, one central bank official warned.

Fed Governor Jerome Powell said he and others on the policy-making Federal Open Market Committee will, between now and the closely watched Sept. 16-17 meeting, analyze data on the labor market in particular before making that decision.

"Nothing has been decided. I haven't made any decisions about what I would support, and certainly the committee hasn't," Powell said on CNBC.

"The economy is moving along about as expected ... the labor market continues to be strong," he said. But "more recent data has been mixed," including a weaker than expected reading of employment compensation in the second quarter.

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CNBC contributor Ron Insana says that Friday's jobs report may be the final impetus the central bank needs to finally start raising interest rates. But only if it the report isn't weak.
ron insana, federal reserve, rate hike, economy
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2015-12-06
Thursday, 06 August 2015 08:12 AM
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