The Fed will most likely raise its interest rates once more by the end of the year, ignoring the deteriorating trade relations with the EU and China. The basis of this decision will not be the political events, but the good economic data that the state economy publishes on a daily basis. Even before the announcement of better-than-expected job data, +223,000 last month, the Fed signaled it was ready to act. Recent data show that vacancies exceed the number of job-seekers for the first time in 18 years. Under such a labor market, employers will have to raise their salaries to overcome the leaks to other companies.
At first glance, everything looks wonderful, but historically, so good data does not make anything good. Central bankers are aware of this, and the fact that too low unemployment leads to wage increases and hence to prices. Unemployment rate of 3.5% in December 1969 was followed by a rather dark period of very high inflation reminiscent of the period of major depression.
Interest picking tomorrow seems secure, and futures markets are also betting on a third rally in September. Currently, the probability of an increase is estimated at 84%.
In March, the Fed raised its interest rates by a quarter percentage point to the range of 1.50-1.75 percent and revised its economic outlook in 2018 and 2019 to increase.
Trader Petar Milanov