Spotlight: U.S. expected to raise interest rates amid confidence in economy

The U.S. job market continued to steadily expand in November amid growing confidence in the economy, making it almost certain that the Federal Reserve will raise interest rates later this month.

SIGNALS

The total nonfarm payroll employment rose by 178,000 in November, following revised gains of 142,000 in October, said the Labor Department on Friday.

In November, the jobless rate went down from October's 4.9 percent to 4.6 percent, the lowest level in nine years.

Also, a robust U.S. dollar kept a rising momentum recently against other major currencies.

These happened when the U.S. economy grew at an annual rate of 3.2 percent in the third quarter of this year, higher than the advance estimate of 2.9 percent and the second quarter growth of 1.4 percent, according to data released by the Commerce Department last week.

U.S. Federal Reserve governor Jerome Powell last week signaled that he prepared to support an interest rate hike as he saw the case for a rate hike has "clearly strengthened."

"Incoming data show an economy that is growing at a healthy pace, with solid payroll job gains and inflation gradually moving up to 2 percent," said the Fed governor at a forum held by the Economic Club of Indiana.

In its November policy meeting, the Fed left interest rates unchanged amid uncertainty about market reactions to the outcome of the U.S. presidential election. However, the central bank signaled that it could raise rates again as soon as December, because officials saw a pick-up in the U.S. economy and inflation.

The Fed will hold its next policy meeting, also the final of the year, on Dec. 13-14. Investors widely expected the Fed would move the rates at the December meeting.

UNCERTAINTY

Experts believed that one time of rate hike is not worrying, but frequent adjustments of interest rates will have a profound impact on the global financial markets.

If the U.S. economy keeps the growing momentum with a rising inflation rate in 2017, the pace of rate increases will be faster than expected.

U.S. President-elect Donald Trump has committed to tax cuts and higher fiscal spending on infrastructure, which could prompt a faster pace of rate increases, media reported quoting U.S. central bank officials.

Lesetja Kganyago, governor of the South African Reserve Bank, predicted an uncertain future in the financial markets with a possible policy shift of the United States.

"The global outlook has become increasingly uncertain following the outcome of the U.S. presidential election. While the new policy direction in the U.S. is still unclear, the markets have interpreted the outcome as being positive for U.S. growth in the short run," he said.

Kganyago said the commitments to tax cuts and higher fiscal spending on infrastructure are positive things expected from the Trump administration. This would result in higher growth and inflation.

However, he said the timing and extent of the expenditure boost are highly uncertain at this stage. While the increase in infrastructure could be positive for the commodity prizes like gold and others, there are possible negative effects on the emerging markets.

"Other aspects of the possible new policy direction are likely to have an adverse effect on emerging markets. These include a possible more aggressive tightening of U.S. monetary policy in response to higher inflation and growth, which could also reduce the multiplier effect of the fiscal expansion," the governor said. Endi