Towards 4 rate hikes by Yellen’s Fed in 2017?

The US labor market figures are so good that they would already meet the criteria set by the Federal Reserve (Fed) to define a situation of “full employment”. With 235,000 jobs created and a 0.2% increase in the average hourly wage in January 2017, the US unemployment rate dropped to 4.7%.

This data encourages optimism both in the record-breaking financial markets and among US entrepreneurs since the election of Donald Trump in November 2016. The health, industry and construction sectors are the main job-creating sectors with respectively 27,000, 28,000 and 58,000 new jobs in January 2017.

The Trump project to increase the US defense budget by 10% should also generate a large number of jobs in the military industry. However, Cyceon pointed out three possible obstacles to the continuation of such a trend. First, the Trump administration has promised businesses and households a lot in terms of deregulation and tax cuts. It must now fulfill its promises.

The Trump administration will also have to raise the debt ceiling to allow the Treasury to continue borrowing on the financial markets. If an agreement in Congress is likely, it is still an additional indication of the significant weight of debt in the US economy. Finally, political risk in Europe remains a major potential factor in destabilizing financial markets.

Under these strong conditions of a very dynamic US economy, many analysts now think there could be up to four rate hikes by the Fed in 2017.