Financial and Economic Brief - December 12, 2017by © Liberty Publishing, Inc.
Powell’s Early Policy Views
Incoming Federal Reserve chair Jerome Powell, appears set to let the tax cut “run its course” through the economy as weak growth in wages and inflation promote his view that the economy remains “underpowered”. Powell sees little risk of inflation that would provoke the Fed to raise rates faster than expected, and takes the weakness in wage growth as a sign that sidelined workers remain to be drawn into jobs. With a background as an investment banker rather than as an economist, Powell will lead “a more data-driven Fed, which at the current juncture means a more dovish Fed…,” said Robin Brooks, chief economist at the Institute of International Finance.
November Jobs Report Strong
According to the November jobs report released on Friday, employers added 228,000 jobs in November and the unemployment rate remained at 4.1%. The report also showed that weekly paychecks increased by 3.1% over the last 12-months, the first time that reading has risen above 3% in almost seven years. Average hourly pay increased 2.5%, which is disappointing, especially in light of the unemployment rate being low. The White House celebrated the report and credited its economic policies for the numbers. In other good news, the economy grew 3.3% in the 3rd quarter, the best since 2014, and the stock market is at record levels.
Launch of Bitcoin Futures
Derivatives exchange Cboe Global Markets launched its bitcoin futures late yesterday, marking the first time investors could get access to the market via a mainstream regulated exchange. Financial markets expect the cryptocurrency to climb higher but at a much slower rate than in recent weeks as warnings of a bubble grew. The one-month bitcoin contract opened at $15,460, dipped briefly before rising to a high of $18,700 and then slipping again. The futures pricing suggests investors believe that the price increases seen in recent months could be set to slow down. Most fund managers at larger asset managers and institutional investors say bitcoin remains “too volatile and lacks the fundamentals” that give other assets value.