The minutes from the Federal Reserve’s May 3 meeting, released today, point to another interest rate increase, the second for 2017, at the central bank’s June 14 meeting. According to the minutes, “most participants judged that if economic information came in about in line with their expectations it would soon be appropriate for the committee to take another step in removing some policy accommodation.”
I’ll grant you that it’s hard, very hard, right now to pay attention to economic fundamentals. There’s the upcoming OPEC decision on oil production cuts, President Trump’s first overseas tour, the continuing circus in Washington and more. But this week also brings the release of minutes from the Federal Reserve’s May 2-3 meeting and the release on Friday of the second estimate of first quarter U.S. GDP growth.
This morning it looks like the combination of turmoil in Washington and some weak economic data have led traders and investors to take money out of risk assets and put money into safe havens. The Standard & Poor’s 500 was off 1.11% and the NASDAQ Composite, which has led this market higher, was down 1.6%. The German DAX Index was off 1.3% and the French CAC 40 Index fell 1.69%.
The headline Consumer Price Index measure of inflation rose 0.2% in April, according to the Bureau of Labor Statistics. That matches projections of a 0.2% increase from economists surveyed by Briefing.com. Core inflation, that is excluding volatile food and energy prices rose by 0.1%. Economists had expected an increase of 0.2%.
The Federal Reserve is certainly behaving like it will raise interest rates another 25 basis points at the June 14 meeting of the Open Market Committee. The U.S. central bank raised its target for the Fed funds rate to 0.75%-1% at its March meeting.
The CME Fed Watch calculations show the Fed funds futures market has priced in an 83% chance of an interest rate increase in June.
This morning the Bureau of Labor Statistics reported that the U.S. economy added just 98,000 jobs in March. That was the weakest gain since May 2015 and way under the 180,000 jobs expected by economists surveyed by Briefing.com and the 263,000 jobs added according to the private ADP Employment Situation Report on Wednesday. But…
The U.s. government is set to release the jobs report for May at 8:30 a.m. New York time. Economists surveyed by Briefing.com are looking for the economy to add a net 180,000 jobs. That projection could be low, however, since the private ADP Employment Situation Report released yesterday showed the economy adding a much stronger than expected 263,000 jobs.
