Fed’s Evans: public may have reasonable concern on inflation goal

With that in mind, commodities will be counting on the Fed to deliver with a dovish bias. “On one hand, the U.S. economy continues to grow and is closing in on full employment”. It must do this not only to prepare markets and companies, thereby lowering the risk of undue financial volatility and economic damage here, but also to reduce the chance that any worldwide turmoil spills back to the us economy. Evans has said he believes the Fed may need to keep interest rates near zero into next year so as to boost inflation back to the Fed’s goal. Following last week’s developments, the CME Group’s (O:CME) Fed Watch set the odds of a December rate hike around 70%, up from previous estimates in the low 60s.

Speaking before the House Financial Services Committee during a hearing on financial regulation, Fed Chairperson Janet Yellen said the economy had been growing at a pretty good clip, an indication it might be time to raise short-term interest rates. Despite those applying for unemployment benefit rising to a 2-month high, the release on Friday of the Non-Farm Payrolls data showing the lowest unemployment figure since 2008 and the largest single monthly gain of employed persons (271k) for the entire year, has raised the likelihood of a rate rise in December up by a few notches.

“That link from China to the broader emerging markets currency universe to Australia is seen to be alive and kicking”, Mr Attrill said.

“I think below 7,000 is a bit overdone”.

GLOBAL OUTLOOK: A report by The Conference Board projects global GDP growth of 2.8 per cent in 2016, barely better than the 2.5 per cent expected this year and well below the 4 per cent-plus rates of the late 2000s.

A forecast-busting surge in USA jobs last month, revealed in official data on Friday, sent the dollar soaring against the euro and emerging market currencies, as traders banked on a USA rate rise next month.

In the footnotes to his speech, Williams cited a Chicago Fed paper on the long-term trend of declining labour force participation. The jobs report was robust enough to raise the confidence of market that a move will be made in December. But continued questions about either of the Fed’s key guideposts – employment or inflation – “could justify waiting”, he said. I am perplexed as I read that the Fed is planning to raise the benchmark interest rate in the near future. That index strips out certain volatile price components that may reflect temporary factors.

A month ago Rosengren had said the Fed should begin a gradual policy tightening before year end. He also said that “experience shows that an economy that runs too hot for too long can generate imbalances that ultimately lead to either excessive inflation or an economic correction and recession”.