After a long period in which "nobody has worried" about the level of interest rates in America, things have changed, says John Authers in the FT. Interest rate futures now imply that the benchmark US interest rate is virtually certain to rise to at least 0.5% (from today's 0%-0.25%) by the end of the year.
Investors appear to have interpreted the smaller drop in payrolls last month as a sign that recovery isn't far away. Yet this looks wildly premature, given that the jobless rate rose to a greater-than-expected 9.5%, a 26-year high.
If anything, overall labour market conditions are still deteriorating, says Stephen Lewis of Monument Securities. "It's inconceivable" that the Fed is thinking about raising rates. It seems it's not just equity investors who have overdosed on hype about a nascent recovery.
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