After NFP, a rate hike during 2016 is a strong possibility - Lloyds Bank

Analysts from Lloyds Bank, point out that after today’s NFP there is a strong possibility of a rate hike from the Federal Reserve during 2016, but not necessarily in September.

Key Quotes:

“July payrolls posted a strong rise of 255k - the second consecutive month it has grown by more than 250k. Following last week’s much weaker-than-expected Q2 GDP report this will come as welcome news to the Federal Reserve. It leaves an interest rate hike by the Fed this year a strong possibility.”

“Indeed the initial market response has been to raise the likely probability attached to a Fed hike by year end to 46% form 35% prior to the report. Even with this data, however, the next policy meeting on September 21st may now be seen as too soon to raise rates by the majority on the FOMC. Instead we expect the Fed to next raise interest rates by 0.25% at its December meeting.”

“The unemployment rate was 4.9% (CON:4.8%), unchanged from June, reflecting offsetting increases in both employment and labour force participation. Average earnings rose in line with expectations with annual growth remaining at 2.6% (CON:2.6%). This suggests that strong employment gains are still not translating into a significant acceleration in wage growth.”