U.S. added 235K jobs in February, making Fed rate hike likely

“The committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate”. “Average wages are starting to grow at rates not seen since 2000, the last time the U.S. confronted a severe worker shortage”, he wrote.

Analysts said the odds strengthened on Friday after figures showed better than expected jobs growth in February.

President Trump’s policies are expected to have a net positive economic impact by 62% of the economists surveyed by Bloomberg, while 23% foresee a net negative effect.

Randall Kroszner, a former Federal Reserve Board governor, told AFP that with the economy beginning to hum, Fed Chair Janet Yellen was “certainly open” to the possibility of raising rates more quickly.

Wall Street also recorded an unprecedented rally to celebrate the end of the zero-rate, zero-inflation environment.

This level of probability was “about as inevitable as it gets”, said Kathleen Brooks, research director at City Index.

Beyond the expected announcement Wednesday of a quarter-point hike in the USA central bank’s benchmark rate target, to a range of 0.75 percent to 1 percent, investors will be looking for whether policy makers change their forecasts for the rest of 2017 and beyond.

Friday’s jobs report has taken the likelihood of a Bank of Canada interest rate cut completely off the table, said Reitzes.

Bond-market investors won’t be taken by surprise when the Fed raises on Wednesday because it has telegraphed its next rate move effectively.

All up it’s been more than a decade since the previous tightening cycle in United States interest rates, which lasted from June 2004 to June 2006, and shares overall did well during that time rising by about 15 per cent.

Worth noting, the underlaying data inside the report indicates the rise in wages will likely continue and could even improve. If this proves correct and the growth rate of overall USA inflation falls, helped in part by the rising US dollar, there will be less urgency for the Fed to tighten monetary policy further. “The risk of higher inflation could point to future interest rate trajectory”, said Tim Fox, chief economist of Emirates NBD.

The February report from the U.S. Bureau of Labor Statistics covered the first complete month of Donald Trump’s presidency, making it a political football.

By contrast, the number of people who said they could not work in February over the prior five years averaged 314,000 (which included two very cold starts to the year in 2014 and 2015 when the economy contracted).

The growth in new USA jobs has been gathering pace in recent months, and there were other signs that U.S. businesses continued to gain strength in February. Average hourly earnings rose by 2.8% year-on-year in January and February.