Premature Fed Rate Hikes Could Cause Global Collateral Damage

Premature Fed Rate Hikes Could Cause Global Collateral Damage by Dan Steinbock

US October jobs report was stronger than expected. It may trigger a premature rate hike.

AFTER 271,000 were jobs added in October, US unemployment rate fell to 5.0 percent. Meanwhile, average annual hourly earnings climbed by the most since 2009. As a result, the dollar strengthened and treasuries plunged. The report was seen as a green light for the Fed’s chief Janet Yellen and her deputy Stanley Fisher, who recently held out the possibility of a December rate increase.

Nevertheless, US employment suffers from structural deceleration, which will force the Fed to normalize slowly and gradually. Moreover, old tensions loom in the new labor markets. While only 4.4 percent of whites...