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USA

Fast Comment US — Weaker-than-expected August payrolls, at 156,000

  1. Unemployment rate rose to 4.4 percent, from 4.3 percent in July
  2. Lower-than-expected wage growth
  3. Fed to announce QT in September and raise rates in December

Macro Comment US — Balance sheet reduction in September

We revise our Fed forecast: we now believe that the central bank will hold rates steady in September and instead announce a plan to reduce its balance sheet at the meeting. In June this year, the Fed published a plan for quantitative tightening. Balance sheet reductions are not intended to play an active role in mone-tary policy during normal times. The Fed's intention is that they should run quietly in the background for years, while monetary policy is operated through adjustments of the federal funds rate.

Fast Comment US — Labour market heating up gradually; but wage growth still lags behind

  1. More private jobs than expected
  2. Unemployment rate still on decreasing trend
  3. Job report still supports the Fed's tightening plans

Rasmus Gudum-Sessingø, Senior Economist | ragu02@handelsbanken.dk

Fast Comment US — PCE confirms subdued June inflation

  1. Inflation about to bottom out?
  2. The Fed keeps a close watch on inflation

Rasmus Gudum-Sessingø, Senior Economist | ragu02@handelsbanken.dk

Fast Comment US — Fed plans to start balance sheet reductions "relatively soon"

  1. No surprises at the Fed meeting; the interest rate was left unchanged
  2. Balance sheet reduction to start "relatively soon"

Macro Comment US — Financial conditions key to the Fed

We are convinced that financial conditions-both actual and expected-are key to understanding why the Fed has not delivered in line with its forward guidance since the start of policy normalisation in late 2013. However, at present, consistency between forward guidance and policy delivering seems to be improving. So far in 2017, actual rate increases have been in line with the Fed's forward guidance. Nevertheless, we expect financial conditions to deteriorate sharply in the future, which will contribute to an end of policy tightening in 2018 and to prompt a recession in 2019.