Fed continues to hold its cards close to its chest - Wells Fargo

Analysts from Wells Fargo, consider that the Federal Reserve will refrain from raising rates in September. According to them the lack of a marked acceleration in earnings (as shown today in the NFP report) reinforces that view.

Key Quotes: 

“The minutes from the June FOMC meeting painted the picture of a Fed that continues to hold its cards close to its chest. There continued to be little clarity around the timing of changes to the Fed’s reinvestment policy, with some participants preferring to start the process within a couple months, whereas others supported holding off until later in the year. The reaction to the FOMC minutes was generally mild, with the selloff in U.S. Treasuries this week driven more by the economic data and foreign developments.” 

“We are of the view that the next fed funds increase will occur in December. At the September meeting, we expect the Fed to refrain from raising rates as it officially announces its balance sheet reduction program, which, in our view, will begin a few weeks later at the start of Q4.”

“Employers added 222,000 net new jobs in June, the second strongest print of 2017. Job gains were broad-based, with healthy hiring in construction, government and leisure & hospitality. The unemployment rate rose a tick to 4.4 percent amid a 361,000 person surge in the labor force. The major weak spot in the report was another sideways print for average hourly earnings growth. The lack of a marked acceleration in earnings reinforces our belief that the Fed will maintain its slow and steady approach to tightening policy in the months ahead.”