The Fed’s mandate is price stability and maximum employment and moderate long-term interest rates.
Employment is fine at the moment and there’s not too many real worries over inflation right now. Job done isn’t it? Maybe their mandate is missing everything else that is going on.
The worsening trade data has been bugging me for a few months now and so has manufacturing. Retail sales haven’t exactly been showing boom times on Main St so you’ve got to ask what’s in this recovery?
The US has shifted from the bottom and that’s all well and good but its taking that next step in cementing the recovery that looks to be a problem. Let’s be clear though that we’ll not be seeing runaway growth anytime soon, but at the moment the US is in danger of not even holding on to the levels that they have right now.
In 2015 we’ll need to see a bit more uplift from the domestic economy if the global scene is still weak. All these jobs gains need to start filtering through into spending and if companies can break free from the shackles of burdening employment costs, we’ll need to see wage rises to help make that happen.
Early 2015 is going to be very big for US (as it will be for the UK and Europe) and I think it’s will set the tone for the rest of the year. If it’s up then the 2014 trends continue. If it’s down then that could tip the apple cart right over.
Until the picture becomes clearer remember that the Fed still wants to raise rates. As they are the ones with the finger on the button that thought should remain foremost in our minds. Until they say otherwise, or the data for their mandates changes dramatically the market may just be on the wrong side of the trade later in the year.
