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by Vincent Flasseur.
Will they/won’t they? And if they do, when will they? Market watchers are keeping an eye on economic indicators for signs that the Federal Reserve, and other central banks, will decide that it’s finally time to raise interest rates.
U.S. job growth surged in October and the unemployment rate hit a 7-1/2-year low of 5.0 percent in a show of economic strength that makes it much more likely the Federal Reserve will raise interest rates in December, Reuters reported.
The unemployment rate now stands at its lowest level since April 2008 and is in a range many Fed officials see as consistent with full employment.
“The employment report had everything you could have asked for. It more than offsets the weakness in the prior two months and positions the Fed to hike rates in December,” said Michelle Meyer, deputy U.S. chief economist at Bank of America Merrill Lynch in New York, according to the Reuters story.
In Europe, for anyone assuming official interest rates would not or could not go below zero, it’s been a sobering year. Four central banks in Europe have broken the taboo and are experimenting with the slightly puzzling concept of negative interest rates, as reported in this Reuters story.
The European Central Bank as well as the Swiss, Swedish and Danish central banks all now employ negative deposit rates – charging their commercial banks for holding reserves on deposit as yet another way of forcing them to lend more.
ECB chief Mario Draghi electrified markets in late October by holding out the prospect of yet another cut in the ECB’s deposit rate of minus 0.2 percent as it battled to get flat lining euro-zone inflation back up to its target of near 2 percent.
The Bank of England made no move towards an early interest rate rise in early November, saying Britain’s near-zero inflation would pick up only slowly, even if borrowing costs stay on hold throughout next year.
Governor Mark Carney, who had previously said a decision on whether to raise rates would come into sharper focus around the end of this year, was vaguer this time, saying simply that the BoE would move when the time was right.
Turning to corporate news, Facebook’s stock hit an all-time high as it posted surprisingly strong profit and revenue growth as the world’s largest social network grew even larger, with a spike in mobile users and advertising.
Let’s review this past month in charts:
Fixed income funds realized a return of positive 0.50% on average during the first ...
Equity mutual funds and ETFs celebrated their fifth quarterly gain in ...
The bond market remains confused about interest rates, which is why it continues to ...
The LSEG/Ipsos Primary Consumer Sentiment Index for November 2023 is at 52.2. Fielded ...