Uncertainties are there. The “positive economic forces prevail but on the negative.” The chairman of the Federal Reserve, Janet Yellen, has launched to the markets a ‘favorable’ message on the economy conditions Use, but speaking of possible increases did not repeat the usual reference to “the coming months”: an absence that excludes a rise rates in June, and still leaves open only a small window of opportunity to an increase in the cost of credit in July; while September may appear more likely.
The speech of Fed chairman was in any case all built around the theme of uncertainty. What concerns the Yellen is definitely the bad data on the labor market on Friday, but it’s not just about that. “The overall situation of the labor market was quite positive. In this context – he admitted – on Friday the data was disappointing. ”
Use rates, close coming. Yellen: “Is it possible in the coming months”
The consequences are important. “We will need to monitor developments in the labor market carefully,” he then added, while pointing out that “you should not give too much importance to the data of a single month.” Because more timely indicators still look good while “the average hourly earnings increased by 2.5% over the last year, a little ‘more rapidly than in recent years is a welcome indication that wage growth might eventually accelerate’ . This is an important point: the Fed has focused heavily on price pressures that can come from an increase in wages, in turn caused by the fall in unemployment. On this issue, however, Yellen words have revealed new accents.
“The latest figures show that we are back to full employment, or the relatively slow growth of wages signals that there is still weakness?”
Janet Yellen, president of the Federal Reserve
Some doubt it will thicken on inflation expectations. After long underestimated, as opposed to what did the ECB, the measures “market” the trend of these attese- whose decline may also reflect a different risk assessment – for the first time the Fed chairman explained that “these indicators have moved enough to get my strong attention.” “If inflation expectations are really moving down – he added – this could call into question the assumption that inflation will return to 2% as fast as I expect.”
US GDP better than expected and the second quarter promises a recovery
They are then fate “new questions” in the Fed’s board. “It greatly reduced the rate of recruitment in April and May – it concluded – a signal of a continued slowdown of the whole economy? Or the monthly increases in jobs will return to the solid pace held in 2015 and early this year? The latest data on the unemployment rate indicate that we are back to full employment, and the relatively slow growth of wages signals that there is still weakness? “. These are questions that lead to a noteworthy statement: “I and my colleagues will continue to deal with these and other related matters.” Is not this an indication of a board already determined to act soon.
Var.% annualized US GDP. (*) Second estimate (Source: US Department of Commerce)
So everything will depend on upcoming data; and this time is not the usual empty formula of central bankers. A rise in June now seems excluded: the Fed will wait for the new statistics on the labor market, next month. The meeting of 27 July, exceeded even the uncertainties of referendume Brexit – that Yellen has made a mention – could still be a valid date for the next narrow; but only if the next directions will manage to dispel at least some ‘many uncertainties highlighted by Yellen. Otherwise discuss this issue again in September.
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