RHB | United States | Dig Beyond the Job Market Headlines…

Economic Research	09 March 2015
US
Economic Highlights
Dig Beyond the Job Market Headlines… Although headline job growth (up 295K) and unemployment rate (down 0.2%-point to 5.5%) in February surprised positively and introduced a fair amount of market buzz last Friday, the details of the release seem more convoluted. Nevertheless, we now believe that the labor market report, on balance, is likely to induce a majority within the FOMC to support a removal of the forward guidance (the “patient” phraseology) at the upcoming March 17-18 meeting, thereby transitioning to a data dependent and meeting-by-meeting mode for considering the first rate hike. And, in our judgment, this should open the door for the FOMC to commence raising rates--assuming financial markets do not turn overly anxious--either at the June, July or September 2015 meeting. While the ongoing consensus is for the first hike to potentially occur in June or September (because it coincides with a scheduled press conference), we do not think that a move at the July FOMC meeting should be ruled out, because the semiannual Congressional testimony (just prior to the July meeting) provides Yellen with a platform to prepare markets for a likely policy move; besides, Yellen has also noted in the past that, if needed, an unscheduled post-meeting press conference could be arranged. Our current call is still for the initial rate increase to transpire in July, with an evolving preference for September over June; however, this forecast remains fluid, contingent on incoming data and continuing Fed rhetoric. Economist:  Thomas Lam  | +65 6533 0389