By Isaac Cohen*
There is great expectation about what the central bank of the United States will do, in ten days, about the federal funds interest rate. Until the last week in August, it seemed that liftoff would start at the forthcoming September 17 meeting. However, some recent events have increased uncertainty about the decision. Market volatility, emanating from a deeper slowdown in China, together with lower commodity prices and a strong dollar, have led some officials to view the decision as less compelling.
Even so, as stated by the Federal Reserve, policy decisions depend on evolving economic conditions. In this case, some indicators are signaling there is enough strength in the US economy. For instance, amid the end of August market volatility, the Commerce Department revealed that US economic growth, during this year’s second quarter, reached 3.7 percent, a remarkable increase from less than one percent in the first quarter.
Additionally, last week, the Labor Department released the August employment figures, which at 173,000 new jobs were less than the monthly average of 212,000 created thus far this year. Some observers saw this lesser figure of job creation in August as indicating the Federal Reserve can wait. But also in August, the unemployment figure decreased from 5.3 in July to 5.1 percent, while hourly wages improved 0.3 percent, better than expected.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.