Market Overview

6 March 2015

Solid U.S. labour market data = interest rate hike by the Fed in June?

The U.S. Labor Department released the labour market data today. The U.S. economy added 295,000 jobs in February, exceeding expectations for a rise of 241,000 jobs, after a gain of 239,000 jobs in January.

The U.S. unemployment rate fell to 5.5% in February from 5.7% in January, beating forecast of a decline to 5.6%. That was lowest level since May 2008.

But the decline was driven by people leaving the labour force.

These figures could mean that the Fed might start to hike its interest rate in June.

But a weak wage growth figures and low inflation in the U.S. could lead to a delay of the interest rate hike by the Fed.

Average hourly earnings increased 0.1% in February, missing forecasts of a 0.2% gain, after a 0.2% drop in January.

The U.S. consumer price index fell to an annual rate of -0.1% in January from 0.8% in December. That was the lowest level since October 2009.

The decline in inflation was driven by falling oil prices. Oil prices might remain low in the U.S. due to oversupply.

Summarising the above, if there is no changes in wage growth and inflation still remains low, it's unlikely that the Fed will start to raise its interest rate hike.

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