NGKF: Labor Market Report Gives Fed Cover to Raise Rates

9/7/15

The labor market continues to add jobs, although not at the robust rate of last winter, according to the latest employment report from the Bureau of Labor Statistics, the last one before the Federal Open Market Committee meets in two weeks to decide whether to raise short-term interest rates.

The report gives cover to the Federal Reserve to finally raise short-term interest rates by a quarter of a percent, reports Newmark Grubb Knight Frank.

Inflation remains below the Fed’s target rate of 2%, and the rising dollar is a drag on manufacturers, but consumers, who account for more than two-thirds of GDP, are stepping up to the plate. There will never be a perfect time for the Fed to begin the long process of returning monetary policy to its pre-crisis equilibrium, but doing so will give them more leverage to combat the next recession, whenever it occurs.

The Fed’s actions re likely to have some impact on commercial and residential mortgage rates, but the Fed will be very careful about raising future rates, which suggests that capital market conditions are unlikely to change rapidly.

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