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WILL RETAIL SALES PUSH THE FED TO HIKE INTEREST RATES?

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WILL RETAIL SALES PUSH THE FED TO HIKE INTEREST RATES?

June 8 2015, 08.05am GMT

STOCK.com

As the retail sales data in the US is to be released on Thursday, investors and economists will keenly follow the reaction of the U.S. Federal Reserve as positive data could lead to an interest rate hike this year.

The Fed could finally be pushed to act if solid retail data confirms the economic growth which was clearly suggested by the May jobs report which was released on Friday.

According to economists, good weather and increased vehicle sales in May have contributed to an increase in spending at a variety of stores.

Wells Fargo Securities senior economist, Sam Bullard, commented that improvements are expected across other sectors as well.

The May retail sales report will be delivered by the U.S. Commerce Department on Thursday. Meanwhile, April’s retail sales report showed that Americans spent more at restaurants during the month compared to at gas stations and other stores.

Fed officials are expected to release their economic projections at a meeting scheduled in mid-June. Meanwhile, as the meeting approaches, markets are shining a spotlight on recently released fresh data on jobs and spending.

Janet Yellen, Federal Reserve Chairwoman, warned that healthy spending and jobs data will most likely lead to a rates hike this year, a move expected to avoid an “overheating economy”.

Chief U.S. economist with Deutsche Bank, Joseph LaVorgna, expressed his optimism on the retail sales report to be released on Thursday and commented that a positive sales report, coupled with a strong employment report, will most certainly give the Federal Reserve “more comfort”.

However, the international lender, IMF (International Monetary Fund), in its monthly U.S economy analysis, advised the Fed to refrain from raising rates this year for the better of the economy.

On Tuesday, the Labor Department is expected to release its monthly Job Openings and Labor Turnover survey (JOLTS) which outlines underlying employments trends. In the most recent report which was delivered in March, it showed that most workers quit work over the last 7 years. This marks a clear indication that employees feel confident in other career prospects.

With such a positive May jobs report, higher wages should be prompted which in turn, allows people to spend more and future growth is then supported.

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