GLOBAL ECONOMY WEEKAHEAD-U.S. jobs data to test case for rate hike

Fri Aug 26, 2016 11:52am EDT
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By Padraic Halpin

DUBLIN Aug 26 (Reuters) - U.S. jobs data top economic readouts from around the world next week as global markets begin to return to business as usual following a typically quiet August with the calm broken on Friday by comments from Federal Reserve Chair Janet Yellen.

Speaking at a three-day international gathering of central bankers in Jackson Hole, Wyoming, Yellen said the case for an interest rate rise has strengthened in recent months because of improvements in the labour market and economy.

Recent strong employment data, and signs that inflation is finally beginning to pick up, have encouraged some policymakers to believe rates should rise, if not as soon as September's policy meeting, then at least before the end of the year.

The Fed last raised rates in December, its first hike for nearly a decade.

Yellen did not indicate when the U.S. central bank might do so next, but her comments reinforced the view that it could come later this year. Fed board member Dennis Lockhart raised the possibly of two increases before year-end.

But not all Fed policymakers agree that a rate hike must come soon and their patience may be tested or justified when U.S. non-farm payrolls for August are released on Friday.

"Following two extraordinarily sound labour market reports, we are looking for slightly weaker data in August, yet this does not change the picture of the US economy further approaching full employment," Commerzbank economist Christoph Balz said.

"The report is unlikely to be sufficient to persuade sceptics (in the Fed) that interest rates should be hiked as soon as in September. Signals from the manufacturing ISM are also more likely to support a cautious stance," he said.   Continued...