No surprises from FOMC - markets will look to the next data

Tuesday, May 03, 2005

The Federal Reserve acted as predicted. The FOMC's decision to raise the Fed Funds rate 25 basis points to 3 percent and the wording of its statement kept to the magical word "measured", that's what was needed to keep markets calm.
Share and especially bond markets stayed within narrow ranges in the first 60 minutes after the release of the rate decision. As the next FOMC meeting will take place almost two months from now on June 29&30, market participants will turn their eye to the next pieces of economic data. Thursday will see the release of jobless claims, expected to come in a tad higher at 324,000. The more important numbers on this day will be productivity and labor costs for the first quarter. Productivity is projected a bit lower at 1.9 to 2 percent after a rise of 2.1 percent. Labor costs are seen 2 percent higher in Bloomberg's consensus forecast too, after a rise of 1.3 percent in the preceding quarter.
Even more attention will be paid to Friday's employment data. Unemployment is seen stable at 5.2 percent and average hourly earnings are expected to come in at a monthly change of 0.2 percent after minus 0.3 percent. Consumer credit is expected at 6 billion dollars after a rise of 5.2 billion in the preceding month.
Markets are most likely to continue their seesaw trading unless one of these indicators shows a big deviation from its previuos figure.


Wikinvest Wire