FOMC preview - page 9

[thenews]

Feds Beige book. Many districts see job mkt tightening. Wages gain.

Beige book released.

• wages gained modestly in most areas amid tight job market
• pricing pressures intensified somewhat
• firms face widespread difficulties of finding skilled labor
• most areas of US economy continued to see modest growth
• eight of 12 districts reported modest price increases
• most manufacturers saw sales rise
• hiring problems for less skilled jobs
• labor market type or tightening
• input price gains wider than rises in final goods prices
• economy continued to expand and modest pace
• The auto  retail sales had expanded but retailer selling prices were flat or down amidst competitive discounting

The Fed's Beige Book is characterizing a US economy where labor conditions are tight and that is leading to some wage gains.  ALthough the input prices are increasing, they are not yet being fully reflective of in the prices to consumers.  Overall, it sounds positive and consistent with more tightenings by the Fed in 2017 (the Fed is projecting 3 additional moves). 

The full report -as prepared by the Boston Fed - can be found by here.

[thenews]

Fed FOMC Preview: Neutral Stance Likely, Inflation Tone Crucial

The main message from the Fed is likely to be increased uncertainty and that it will closely monitor all aspects of the economy, especially inflation indicators. There should be a confident tone surrounding the economy and employment, but some doubts could be expressed over inflation trends given dollar strength.


Overall, the wait and see and non-committal attitude is likely to disappoint dollar bulls with the US currency weakening slightly. Treasury yields are also liable to edge lower with a neutral to slightly positive tone for equities. Overall, the statement should trigger only limited moves unless Trump decides to comment.


At this week’s Federal Reserve Open Market Committee (FOMC) meeting, there is no real possibility that the Fed will change interest rates following the move to hike rates in December. The Fed likes to move when there is a press conference and a series of updated forecasts which is not the case for this meeting.


All attention will be on the statement and what is excluded will be just as important as what is included.


The FOMC is likely to express further confidence in the economy with commentary that the labour market has continued to improve and that the US is close to full employment.


It is also likely to maintain its expectations that inflation will rise to 2% over the medium term and there will be optimism surrounding earnings growth, although there could be some warning that inflation will be dampened by a strong dollar.


The December projections suggested that three rate increases were realistic for 2017 and markets overall are expecting the first increase in June.

---

read more