"If the labour market continues to improve more quickly than anticipated . . . then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned"
- Janet Yellen, Fed chairwoman
Economists from the ING believe the world's largest economy has bounced back in the second quarter following a dismal start to the year. While growth is expected to reach around 3.0% in the three months through June, putting the economy back on track, Friday's report will show the economy created 225,000 in July, while unemployment rate is likely to drop to 6.0%.
This forecasts echo with forecasts the FOMC is set to stay of its earlier-chosen course with another $10 billion taper of its stimulus programme on Wednesday. Officials will also most likely tweak its language on the domestic economy in order to address bout strong payrolls growth. In case the FOMC will cut its asset-purchase programme further, it will bring monthly purchases to a $25 billion per month, on the way to reach a complete stop in October. There are practically no chances the Fed will take a pause this month, as two weeks ago the chairwoman changed her language, hinting on a sooner-than-expected rate hike in case the economy continues to perform at the same pace. While Richard Fisher of Dallas already claimed a rate hike will be made early next year, Dennis Lockhart of Atlanta is still betting on a second half of 2015. The Fed is likely to express its target interest rate as a fairly wide range, for instance, the rate can be raised in a range of 0.25% to 0.5%.
© Dukascopy Bank SA