As capital market begin to prepare for the December FOMC meeting and the possibility of a rate hike, there a number of key points analysts and economics are considering.  As we have witnessed in the last run up to the FOMC meeting in September, the bets on actual FED action are varied and at times wrong.  For the previous meeting, half of the analysts from large banks were wrong on the perspective actions of the FOMC.  Economists follow statistics in addition to market indications and Fed governor rhetoric.   

A number of economists mention the need of capital markets to follow inflation rates not just in the US but in international markets, as well.  Should the FOMC raise rates, what is the implication for global markets with respect to current inflation, deflation, and stagflation risk in European, Asian, and Latin American and emerging markets?  Additionally, will the FOMC conduct a one-time rate hike to monitor the possible implication on currency markets and the prospect of further economic weakness in numerous international locations?

Labor markets are an important aspect to the current FOMC’s focus.  On a number instances, we heard FOMC’s Yellen and other governors discuss the how labor markets are sustaining slack.  Labor economists monitor this slack for possible indication of labor prices.

A few things to keep in mind as we read this morning’s employment report.  There will be no shortage of punditry and opinion.  Stay focused on the data and market reaction.  The report is for the previous month so understand the notion of lagging indicators.  FOMC pays attention to not just the headline numbers but the specifics of average hourly earnings, hours worked, and workforce participation rate. 

We will continue to monitor the market and economist reaction to the latest of economic conditions.

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