With excellent October jobs data, the interest rates hike for December is back on the table. The U.S. economy added 271,000 jobs in October, much above the market expectation of 180,000 and representing the strongest pace of a one-month jobs gain in 2015. The Fed in its latest FOMC meeting also hinted at a December lift-off if the U.S. economy remains on track.
In a recent Wall Street Journal poll, about 92% of the economists believe that the first interest rate hike in almost a decade will come at the December 15–16 policy meeting, while 5% expect the Fed to wait until March. The rest expect the Fed to keep cheap money flowing for longer.
This is especially true as recent headwinds have faded with substantial positive developments seen in the global economy and financial market lately. In particular, the Chinese economy is showing signs of stabilization on the back of better-than-expected GDP growth data and another rate cut while the Japanese and European central banks are seeking additional stimulus measures to revive their economies.
Further, the U.S. economy is showing an impressive rebound after a lazy summer and is continuing to outpace the other economies. Though the manufacturing sector expanded at its slowest pace in more than two years in October on a weak global economy and strong dollar, rise in new orders spread some hopes in the sector. Consumer confidence picked up in October, as measured by the Thomson Reuters/University of Michigan index, which rose to 90 after dropping to 87.2 in September from 91.9 in August.