Closer to another rate hike

Pointing to the strong performance in the labor market, as well as the outlook for inflation and economic activity she seemed to be setting the table for investors to be ready.

Is the crowd is underestimating the prospects for a rate hike? Vice President said that the institution was nearing its full employment and 2% inflation targets – while Kansas City Federal Reserve’s President, Esther George, was more hawkish by declaring that interest rates should be raised gradually. Whether the Fed would go depends on what the market does.

“Any signs of strength make investors worry that the Fed will accelerate their plans to raise interest rates”, said Alan Gayle, head of asset allocation at Atlanta-based RidgeWorth Investments.

September is an appalling month for the US stocks, as far as historical data is considered.

Even so, economists say deferring to fiscal authorities and hoping for the best with the current monetary policy toolbox is risky. However, the recent prediction is two rates. “In addition, the level of short-term interest rates consistent with the dual mandate varies over time in response to shifts in underlying economic conditions that are often evident only in hindsight”. I think the low odds on a rate hike in September is the market’s way of telling the Fed that if they do hike, it would be a mistake. At first, that’s largely how the media interpreted it, too.

Fed chair Janet Yellen’s speech at the Jackson Hole meeting and hawkish comments by vice chairman Stanley Fischer have boosted market expectations for a rate hike in the short term.

Investors focus is now on Friday s jobs creation report, which could be pivotal in the Fed s decision-making ahead of next month s policy meeting, although there are some reservations about whether a move will be made then. “Unfortunately, the Fed has set itself up with this one number”.

“On the whole, the United States consumer has remained a robust proposition within an global context of weakening demand, and the positive data may put the long-speculated interest rate hike further up Yellen’s agenda”, said Dennis de Jong, managing director of UFX.com. “It’s different from others, so we don’t have to do what other central banks are going to do, and in order to avoid financial excess down the road, we’re going to remove just a little bit of excessive monetary accommodation”. Which contradicts Fischer’s comments. Just 15%of analysts forecast a rate hike at the next FOMC meeting in a few weeks. All the rest have their own leanings and pet peeves. API inventory data late Tuesday showed a build in crude of 942,000 barrels, which is bearish, but a drawdown in gasoline of 1.65 million barrels. For all the hype over everything Yellen says, her vote doesn’t count more than anyone else’s. For now, however, they’re being cautious in what they’re signaling about the future and are keeping more activist options at arm’s length.

We actually thought the rest of Yellen’s speech was manifestly more interesting. While the technicals are now firmly bearish, an extremely weak NFP would destroy the hopes of the Fed raising rates in the short term and could offer Gold a lifeline.

Gold is trading atop of its four-week low (+$1,320) this morning as concerns over the possibility of an interest-rate increase by the Fed is pressuring the weaker “long” positions to close out their bets on the precious metal.3. Yellen’s discussion of how they did it was fascinating (once you cut through the dry academic tone) and might help instill confidence in some corners of the market. “A 250,000 number like July would get the Fed’s attention”. Whether it uses them well is another matter, but it’s impossible to know today-and impossible to forecast.

“We’ll wait to see what happens on Friday”.