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21 Dec 2015
US: Post the first hike’-era is set to begin – Danske Bank
FXStreet (Delhi) – Research Team at Danske Bank, suggests that in the US, the ‘post the first hike’-era is set to begin after as expected, the FOMC and Janet Yellen reiterated that the hiking cycle will be gradual and data dependent.
Key Quotes
“There are many important data releases over the next three weeks. We highlight the most important ones below.
Monthly PCE inflation data for November are due on Wednesday. We estimate PCE core inflation was 0.1% m/m in November, taking the annual growth rate to 1.4%, although we admit it is a close call between 1.3% and 1.4%. We estimate headline PCE inflation was +0.1% m/m (0.5% y/y). There is no doubt the Fed would still very much like to see PCE core inflation moving higher and we believe this is a major reason the Fed would like to move on with the next hikes only slowly.
We expect the jobs report for December to show that employment has continued to rise this month and that the labour market continues to tighten. Our main focus is on the growth in average hourly earnings, as higher wage growth is necessary for higher underlying inflation pressure in the US. The Phillips curve, which describes the relationship between unemployment and wage growth, shows that wage growth has been ticking up this year and we expect this to continue next year too.
The ISM indices for December are due to be released at the beginning of the new year. ISM manufacturing in November declined to 48.6, the lowest level since June 2009. We think it will rebound back to 50.0 in December. We think ISM non-manufacturing will stay in the range 55-57 in coming months, suggesting further growth in the sectors outside manufacturing (mainly services).
Note that the minutes from the FOMC meeting will be released at the beginning of the new year (6 January). Note also that FOMC members are now free to speak again and we will listen carefully to any speeches they may deliver.”
Key Quotes
“There are many important data releases over the next three weeks. We highlight the most important ones below.
Monthly PCE inflation data for November are due on Wednesday. We estimate PCE core inflation was 0.1% m/m in November, taking the annual growth rate to 1.4%, although we admit it is a close call between 1.3% and 1.4%. We estimate headline PCE inflation was +0.1% m/m (0.5% y/y). There is no doubt the Fed would still very much like to see PCE core inflation moving higher and we believe this is a major reason the Fed would like to move on with the next hikes only slowly.
We expect the jobs report for December to show that employment has continued to rise this month and that the labour market continues to tighten. Our main focus is on the growth in average hourly earnings, as higher wage growth is necessary for higher underlying inflation pressure in the US. The Phillips curve, which describes the relationship between unemployment and wage growth, shows that wage growth has been ticking up this year and we expect this to continue next year too.
The ISM indices for December are due to be released at the beginning of the new year. ISM manufacturing in November declined to 48.6, the lowest level since June 2009. We think it will rebound back to 50.0 in December. We think ISM non-manufacturing will stay in the range 55-57 in coming months, suggesting further growth in the sectors outside manufacturing (mainly services).
Note that the minutes from the FOMC meeting will be released at the beginning of the new year (6 January). Note also that FOMC members are now free to speak again and we will listen carefully to any speeches they may deliver.”