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Fed: Good scenario for liftoff in December – Wells Fargo

FXStreet (Córdoba) - According to economics from Wells Fargo, Friday’s NFP was a game changer supporting the Federal Reserve liftoff but they warn that the trajectory of future rate hikes will likely be lower that FOMC current projections (dot map).

Key Quotes:

“October’s strong employment report has removed most of the doubts about whether the economy is strong enough for the Fed to begin to normalize interest rates at the December 16th FOMC meeting.”

“The breadth of the strength greatly enhanced the credibility of this report, which explains why the October employment report has been such a game changer in terms of interest rates and exchange rates.”

“So even after October’s excellent report, employment is rising no faster than we expected over this period. What has changed, however, is that there is much less concern about the downside risks to the economy.”

“There now appears to be less downside risk to the U.S. economy in the near term and 2016, even though global economic growth looks like it will be even slower and inflation may take a bit longer to move back to a 2 percent pace on a sustained basis. That is a good enough scenario for a December liftoff but the trajectory of future rate hikes will likely be lower than the Fed’s dot map suggested back at the September FOMC meeting.

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