Garrett Knight Associates: The nonfarm payrolls data for October is being regarded as the key deciding factor for a Fed rate hike or hold when the Federal Open Markets Committee (FOMC) meets for the last time in December.

Despite the huge miss of September’s data still ringing in their ears, the voting members of the FOMC have, nevertheless, persisted in expressing their individual opinions on the potential for an interest rate hike before the end of 2015. Janet Yellen’s statement following this month’s decision to keep rates on hold sounded a notably more hawkish tone and a narrow miss on US Q3 GDP has led investors to speculate that the economy is strong enough to withstand a 25 basis points increase.

“Despite clear evidence of a slowing in the US economic recovery, the Fed is positively itching to begin normalizing monetary policy,” said Garrett Knight Associates’ senior economist Yuri Abe. “The only problem is that, traditionally, central banks raise interest rates when an economy is showing signs of growing too fast. There is absolutely no evidence of that; in fact, it’s quite the opposite.”

Friday’s jobs report is expected to show the US economy created 185,000 but analysts at Garrett Knight Associates believe the number will come in significantly lower.

“We’re thinking 140,000 jobs with the unemployment rate remaining steady at 5.1%. Regardless, we doubt there’ll be enough justification in the data for a Fed rate hike,” explained Abe.

Garrett Knight Associates’ analysts believe that Fed monetary stimulus will make a comeback before any normalization of policy and the firm’s strategists are positioning client portfolios to reflect that viewpoint.

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Garrett Knight Associates is a highly specialised international investment management firm. With over a decade's worth of experience in providing our clients with discretionary and advisory portfolio services for private investors, trusts, pension schemes and high net worth investors, we use an expansive array of carefully selected investment products to maintain healthy growth targets.

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