Following the latest jobs report from the Bureau of Labor Statistics, the path for a March rate hike now seems completely clear. At this point, investors’ focus has shifted to just how aggressive the Federal Reserve will be.
When the Labor Department reported that the U.S. economy added 235,000 jobs in February and the unemployment rate dropped to 4.7 percent, fed fund futures traders became convinced that a rate hike is imminent. According to CME Group, the implied probability of a March rate hike is now at 100 percent. In fact, the futures market is currently pricing in a 93 percent chance the Fed will opt for an aggressive rate hike in the 0.75 -1.0 percent range just three months after December’s relatively modest 0.25 percent hike.
The Federal Reserve prefers not to catch financial markets off guard with its monetary policy decisions, and it seems as if this month is no exception. Without officially tipping their hand, Fed Chair Janet Yellen and other Federal Reserve officials have been strongly hinting at a March rate hike in recent weeks.
“At our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Yellen said in a speech in Chicago on March 3.
“There’s no question that animal spirits have been unleashed a bit post the election,” New York Federal Reserve President William Dudley said in an interview on Feb. 28.
If the Federal Reserve does opt for a more aggressive rate hike, the SPDR Gold Trust ETF (ticker: GLD) and other gold investments could take…
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