Tag Archives: Interest Rates

Fed set to hold rates steady, remain on track for more hikes

FILE PHOTO: The Federal Reserve Building stands in Washington, DC, U.S., April 3, 2012. REUTERS/Joshua Roberts/File Photo

By Lindsay Dunsmuir

WASHINGTON (Reuters) – The Federal Reserve is expected to keep interest rates unchanged on Wednesday, but solid economic growth combined with rising inflation are likely to keep it on track for another two hikes this year even as President Donald Trump has ramped up criticism of its push to raise rates.

The U.S. central bank so far this year has increased borrowing costs in March and June, and investors see additional moves in September and December. Policymakers have raised rates seven times since December 2015.

The Fed will announce its decision at 2 p.m. EDT (1800 GMT) on Wednesday. No press conference is scheduled and only minor changes are anticipated compared with the Fed’s June policy statement, which emphasized accelerating economic growth, strong business investment and rising inflation.

“They’ve got expectations pretty much where they want them,” said Michael Feroli, an economist with JPMorgan. “They may need to finesse how they word the language on inflation, but I think the ultimate message is going to be the same.”

The U.S. economy grew at its fastest pace in nearly four years in the second quarter as consumers boosted spending and farmers rushed shipments of soybeans to China to beat retaliatory trade tariffs, Commerce Department data showed on Friday.

The Fed’s preferred measure of inflation – the personal consumption expenditures (PCE) price index excluding food and energy components- increased at a 2.0 percent pace in the second quarter, the data also showed. The latest monthly figures released on Tuesday showed prices in June were 1.9 percent higher than a year earlier.

The core PCE hit the U.S. central bank’s 2 percent inflation target in March for the first time since December 2011.

U.S. labor costs, a key measure of how much slack is left in the market, posted their largest annual gain since 2008 in the second quarter, the Labor Department said on Tuesday.

TRUMP CRITICISM

Economic growth has been buoyed by the Trump administration’s package of tax cuts and government spending, and Fed Chairman Jerome Powell has said overall the economy is in a “really good place.”

The unemployment rate stands at 4.0 percent, lower than the level seen sustainable by Fed policymakers.

The central bank is expected to continue to raise rates through 2019 but policymakers are keenly debating when the so-called “neutral rate” – the sweet spot in which monetary policy is neither expansive nor restrictive – will be hit.

Rate-setters are closely watching for signs that inflation is accelerating and they are expecting economic growth to slow as the fiscal stimulus fades.

They also remain wary of the potential effects of a protracted trade war between the United States and China which could push the cost of goods higher and hurt company investment plans.

The Fed’s policy path will see interest rates peak at much lower levels than in previous economic cycles. Even so, Trump, in a departure from usual practice that presidents do not comment on Fed policy, said he was worried growth would be hit by higher rates.

Administration officials played down the president’s comments, saying he was not seeking to influence the Fed.

On the campaign trail, Trump criticized Powell’s predecessor as Fed chief, Janet Yellen, for keeping rates too low.

Trump appointed Powell and Fed Governor Randal Quarles, and he has three other nominees to the rate-setting committee awaiting U.S. Senate confirmation. Almost all have been seen as mainstream in their attitude to economic policy. Economists say Trump has little influence over Fed policy beyond the personnel changes he has already made.

Trump’s tweets are a far cry from the 1970s when then-President Richard Nixon told the Fed chairman to kick rate setters “in the rump” to keep rates low until after an election. That stoked inflation and eventually strengthened the Fed’s independence, something that has become even more entrenched since.

“Powell is obviously someone who values the Fed’s independence,” said Paul Ashworth, an economist with Capital Economics. “I don’t expect them to change tack because of political pressure.”

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci and Paul Simao)

Turkey’s Erdogan sworn in with new presidential powers

FILE PHOTO: Turkish President Tayyip Erdogan addresses his supporters during an election rally in Istanbul, Turkey, June 23, 2018. REUTERS/Alkis Konstantinidis/File Photo

By Ece Toksabay and Gulsen Solaker

ANKARA (Reuters) – Tayyip Erdogan was sworn in again as Turkey’s president on Monday, assuming sweeping powers he won in a referendum last year and sealed in a hard-fought re-election victory two weeks ago.

Erdogan, who has dominated Turkish politics for 15 years, says the powerful new executive presidency is vital to drive economic growth, ensure security after a failed 2016 military coup and safeguard the country from conflict in Syria and Iraq.

“As president, I swear upon my honor and integrity, before the great Turkish nation and history, to work with all my power to protect and exalt the glory and honor of the Republic of Turkey,” Erdogan told parliament as he took the oath of office.

The introduction of the new presidential system marks the biggest overhaul of governance since the Turkish republic was established on the ruins of the Ottoman Empire nearly a century ago.

The post of prime minister has been scrapped and the president will now be able to select his own cabinet, regulate ministries and remove civil servants, all without parliamentary approval.

Erdogan’s supporters see the changes as a just reward for a leader who has put Islamic values at the core of public life, championed the pious working classes and overseen years of strong economic growth.

Opponents say the move marks a lurch to authoritarianism, accusing Erdogan of eroding the secular institutions set up by modern Turkey’s founder, Mustafa Kemal Ataturk, and driving it further from Western values of democracy and free speech.

NEW CABINET TO BE NAMED

Erdogan is expected to name a streamlined cabinet of 16 ministers on Monday evening after a ceremony at the presidential palace for more than 7,000 guests, including Venezuelan President Nicolas Maduro, Russia’s Prime Minister Dmitry Medvedev and Hungarian Prime Minister Viktor Orban.

No major Western leader was included on a list of 50 presidents, prime ministers and other high-ranking guests published by state news agency Anadolu.

Investors were waiting to see whether cabinet appointees would include individuals seen as market-friendly, and particularly whether Mehmet Simsek, currently deputy prime minister, would continue to oversee the economy.

“For the cabinet appointments in the past several years, the most important issue has been the presence of the current deputy prime minister, Mehmet Simsek,” said Inan Demir, a senior economist at Nomura International.

The lira TRYTOM, which is down some 16 percent so far this year and has been battered by concern about Erdogan’s drive for lower interest rates, firmed to its highest level since mid-June before falling back to stand at 4.61 against the dollar at 1350 GMT.

Erdogan has described high interest rates as “the mother and father of all evil”, and said in May he would expect to wield greater economic control after the election.

“We will take our country much further by solving structural problems of our economy,” he said on Saturday, referring to high interest rates, inflation and the current account deficit.

Inflation surged last month above 15 percent, its highest level in more than a decade, despite interest rate hikes of 500 basis points by the central bank since April.

(Editing by Dominic Evans and Gareth Jones)

Wall Street edges higher as strong jobs data offsets trade worries

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 28, 2018. REUTERS/Brendan McDermid

By Sruthi Shankar and Savio D’Souza

(Reuters) – U.S. stocks edged higher on Friday on stronger-than-expected job growth in June, offsetting concerns from a trade war between the United States and China.

Nonfarm payrolls increased by 213,000 jobs last month, the Labor Department said, topping expectations of 195,000, while the unemployment rate rose from an 18-year low to 4.0 percent and average hourly earnings rose 0.2 percent.

The moderate wage growth could allay fears of a strong build-up in inflation pressures, keeping the Federal Reserve on a path of gradual interest rate increases.

“It was what the market wanted to see: more jobs created than expected, wage growth moderate and creating jobs where you want to see them … It’s not just creating jobs it’s creating careers,” said J.J. Kinahan, chief market strategist at TD Ameritrade in Chicago.

The strong jobs data follows the minutes of the Federal Reserve’s latest policy meeting which showed policymakers discussed if recession lurked around the corner and expressed concerns trade tensions could hit an economy that by most measures looked strong.

Earlier stock futures were set for a more cautious start after the United States and China imposed tariffs on each other’s goods worth $34 billion, with Beijing accusing Washington of starting the “largest-scale trade war.”

President Donald Trump warned the United States may ultimately target over $500 billion worth of Chinese goods, but global markets remained broadly sanguine, though concerns about the conflict escalating capped appetite for risk.

“The expectation of things is always worse for the market than the reality,” said Kinahan. “We certainly have to pay attention to trade but it’s been expected for a long time.”

At 9:54 a.m. EDT the Dow Jones Industrial Average was down 19.67 points, or 0.08 percent, at 24,337.07, the S&P 500 was up 4.26 points, or 0.16 percent, at 2,740.87 and the Nasdaq Composite was up 34.68 points, or 0.46 percent, at 7,621.10.

Eight of the 11 major S&P sectors were higher, led by a 0.8 percent jump in the S&P healthcare index.

Biogen jumped 17.8 percent after the company and Japanese drugmaker Eisai Co said the final analysis of a mid-stage trial of their Alzheimer’s drug showed positive results.

Among the decliners were industrials, energy and materials indexes.

Boeing, the single largest U.S. exporter to China, slipped 0.7 percent and Caterpillar dropped 1.3 percent.

The Philadelphia Semiconductor index, which is made up of chipmakers most of whom rely on China for a substantial chunk of revenue, dropped 0.4 percent.

Advancing issues outnumbered decliners by a 1.65-to-1 ratio on the NYSE and by a 2.07-to-1 ratio on the Nasdaq.

The S&

P index recorded 10 new 52-week highs and two new lows, while the Nasdaq recorded 67 new highs and nine new lows.

(Reporting by Sruthi Shankar and Savio D’Souza in Bengaluru; Editing by Arun Koyyur)

Turkey’s lira hammered after Erdogan says wants greater economic control

By Daren Butler and Nevzat Devranoglu

ISTANBUL (Reuters) – Investors hammered Turkey’s lira on Tuesday, sending it to a record low after President Tayyip Erdogan said he plans to take greater control of the economy after next month’s election, deepening concerns about his influence on monetary policy.

Erdogan’s comments, in an interview with Bloomberg Television in London, reinforced long-standing worries about the central bank’s ability to fight double-digit inflation amid the president’s drive for lower interest rates.

He said the central bank, while independent, would not be able to ignore signals from the new executive presidency that comes into effect after the June polls. A self-described “enemy of interest rates”, Erdogan wants borrowing costs lowered to fuel credit and new construction.

“I will take the responsibility as the indisputable head of the executive in respect of the steps to be taken and decisions on these issues,” he said in the interview broadcast on Tuesday.

Turkey has called snap presidential and parliamentary elections for June 24 and polls show Erdogan as the strongest candidate to win the presidential vote. Turks narrowly backed a switch to an executive presidency in a referendum last year. That change is due to go into effect after the vote.

Erdogan’s comments helped pushed the ailing lira  to a fresh record low of 4.4604 against the dollar, bringing its decline this year to more than 14 percent.

It clawed back some of its losses after one of his advisers, Cemil Ertem, said the central bank had the independence to use all the tools at its disposal.

Yields on 10-year government bonds briefly touched their highest since at least January 2010.

 

PRESIDENT RESPONSIBLE

“Centralization of power and interference in the monetary policy is a concern to us,” said Dietmar Hornung, an associate managing director and head of European Sovereigns at ratings agency Moody’s, at a conference in London.

However, Erdogan’s economic adviser Ertem said the reduction of rates was a general target, rather than a specific aim of the bank’s next rate-setting meeting on June 7 – comments likely designed to take some pain off the lira.

“President Erdogan’s emphasis is not directed towards June 7. What the president says is that interest rates should be reduced as a target,” he told Reuters.

Erdogan said citizens would ultimately hold the president responsible for any problems generated by monetary policy.

“They will hold the president accountable. Since they will ask the president about it, we have to give off the image of a president who is effective in monetary policies,” he said.

“This may make some uncomfortable. But we have to do it. Because it’s those who rule the state who are accountable to the citizens,” he said.

He also said Halkbank <HALKB.IS> executive Mehmet Hakan Atilla, who was found guilty by a U.S. court of helping Iran evade U.S. sanctions, was innocent and Turkey wanted his acquittal.

“If Hakan Atilla is going to be declared a criminal, that would be almost equivalent to declaring the Turkish Republic a criminal,” he said.

To view a graphic on Turkey inflation and central bank funding, click: https://reut.rs/2rhsMkh

(Additional reporting by Marc Jones in London; Writing by Daren Butler and David Dolan; Editing by Janet Lawrence)

U.S. economy gains 313,000 jobs in February; wage growth slows

Job seekers and recruiters gather at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth surged in February, recording its biggest increase in more than 1-1/2 years, but a slowdown in wage gains pointed to only a gradual increase in inflation this year.

Nonfarm payrolls jumped by 313,000 jobs last month, boosted by the largest rise in construction jobs since 2007, the Labor Department said on Friday. The payrolls gain was the biggest since July 2016 and triple the roughly 100,000 jobs the economy needs to create each month to keep up with growth in the working-age population.

The labor market is benefiting from strong domestic demand, an improvement in global growth as well as robust U.S. business sentiment following the Trump administration’s $1.5 trillion income tax cut package that come into effect in January.

Average hourly earnings edged up four cents, or 0.1 percent, to $26.75 in February, a slowdown from the 0.3 percent rise in January. That lowered the year-on-year increase in average hourly earnings to 2.6 percent from 2.8 percent in January.

The unemployment rate was unchanged at a 17-year low of 4.1 percent in February for a fifth straight month as 806,000 people entered the labor force in a sign of confidence in the job market. The average workweek rebounded to 34.5 hours after falling to 34.4 hours in January.

With Federal Reserve officials considering the labor market to be near or a little beyond full employment, the moderation in wage growth last month did little to change the view that the U.S. central bank will raise interest rates at its March 20-21 policy meeting.

Slow wage growth, however, could temper expectations the Fed will raise its rate forecast to four hikes this year from three. There is optimism that tightening labor market conditions will spur faster wage growth this year and pull inflation toward the Fed’s 2 percent target.

“While the employment gains unequivocally suggest underlying strength in the economy, wage gains remain muted enough for the Fed to continue with an only gradual normalization of the policy stance. Stock markets are reacting accordingly,” said Harm Bandholz, chief U.S. economist at UniCredit Bank in New York.

Speculation that the central bank would upgrade its rate projections was stoked by Fed Chairman Jerome Powell when he told lawmakers last week that “my personal outlook for the economy has strengthened since December.”

While Powell said there was no evidence of the economy overheating, he added “the thing we don’t want to have happen is to get behind the curve.”

Economists polled by Reuters had forecast payrolls rising by 200,000 jobs last month and the unemployment rate falling to 4.0 percent. Average hourly earnings had been expected to increase 0.2 percent in February.

Data for December and January was revised to show the economy adding 54,000 more jobs than previously reported.

U.S. stock indexes opened higher after the data while prices of U.S. Treasuries were trading lower. The dollar was largely unchanged against a basket of currencies.

CONSTRUCTION SHINES

Some companies like Starbucks Corp and FedEx Corp have said they would use some of their windfall from a tax cut package to boost workers’ salaries. Walmart announced an increase in entry-level wages for hourly employees at its U.S. stores effective in February.

The employment report suggested the economy remained strong despite weak consumer spending, home sales, industrial production and a wider trade deficit in January that prompted economists to lower their first-quarter growth estimates. Gross domestic product estimates for the January-March quarter are around a 2 percent annualized growth rate. The economy grew at a 2.5 percent pace in the fourth quarter.

The full impact of the tax cuts and a planned increase in government spending has yet to be felt, and a robust job market could heighten fears of the economy overheating.

“The economy is simply too strong,” said Chris Rupkey, chief economist at MUFG in New York. “There’s no reason whatsoever for the Federal Reserve to have a stimulative monetary policy at this stage of the business cycle.”

Economists expect the unemployment rate to fall to 3.5 percent this year. A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, was unchanged at 8.2 percent last month.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose three-tenths of a percentage point to a five-month high of 63.0 percent in February.

An even broader gauge of labor market health, the percentage of working-age Americans with a job, increased to 60.4 percent last month from 60.1 percent in January.

Employment gains were led by the construction sector, which added 61,000 jobs, the most since March 2007. Hiring at construction sites was likely boosted by unseasonably mild temperatures in February.

Manufacturing payrolls increased by 31,000 jobs, rising for a seventh straight month. The sector is being supported by strong domestic and international demand as well as a weaker dollar. Retail payrolls jumped by 50,300, the largest increase since February 2016.

The Labor Department said that was because on an unadjusted basis the sector hired fewer workers than usual for the holiday season and did not shed many jobs after the holidays. As a result, retail employment rose after the seasonal adjustment, the department said.

Government employment increased by 26,000 jobs last month, with hiring of teachers by local governments accounting for the bulk of the rise. There were also increases in payrolls for professional and business services, leisure and hospitality as well as healthcare and social assistance.

Financial sector payrolls increased by 28,000 last month, the most since October 2005.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao)

Wall Street kicks off 2018 on a strong note

The trading floor is seen on the final day of trading for the year at the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., December 29, 2017

By Sruthi Shankar

(Reuters) – Wall Street’s main indexes were higher on Tuesday, the first trading day of the year, buoyed by gains in technology and consumer discretionary stocks.

Major stock indexes closed out 2017 with their best performance since 2013, powered by a combination of strong economic growth, solid corporate earnings, low interest rates and hopes of corporate tax cuts.

“The first week of trading usually suggests the overall trend of the markets which we expect to be positive,” Peter Cardillo, chief market economist at First Standard Financial in New York, wrote in a note.

Oil prices hovered near their mid-2015 highs on Tuesday amid large anti-government rallies in major exporter Iran and ongoing supply cuts led by OPEC and Russia.

Gold and copper prices continued their upward march, but the greenback began the year on the back foot, with the dollar index slipping to its weakest level since September.

“While we don’t expect the Iranian unrest to reach a full blown political situation just yet, the protest will add to an already positive uptrend in oil and gold prices,” Cardillo said.

December payrolls report, data on manufacturing and service sectors are among leading indicators expected during the week, and will be scrutinized for signs of improving economic health and the number of interest rate hikes this year.

Minutes from the Federal Reserve’s December meeting, when the central bank raised rates for the fourth time since the 2008 financial crisis, will be issued on Wednesday.

At 9:34 a.m. ET (1434 GMT), the Dow Jones Industrial Average was up 112.06 points, or 0.45 percent, at 24,831.28 and the S&P 500 was up 9.49 points, or 0.35 percent, at 2,683.1. The Nasdaq Composite was up 21.51 points, or 0.31 percent, at 6,924.90.

Six of the 11 major S&P sectors were higher, led by gains in technology and consumer discretionary stocks.

Shares of Walt Disney rose 1.6 percent, giving the biggest boost to the Dow, after brokerage Macquire upgraded the company’s stock to “outperform”.

Netflix and Discovery Communications also rose on positive recommendations from Macquire.

Shares of casino operators Wynn resorts, Las Vegas Sands and Melco Resorts Entertainment were down after a report showed lower-than-expected rise in Macau gambling revenue in December.

Abbott Labs jumped 2.6 percent after JPMorgan and Morgan Stanley upgraded the healthcare company’s stock to “overweight”.

Advancing issues outnumbered decliners on the NYSE by 1,938 to 652. On the Nasdaq, 1,678 issues rose and 743 fell.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila)

Fed interest rate hike expected next week, three hikes expected in 2018/poll

The Federal Reserve headquarters in Washington September 16 2015. REUTERS/Kevin Lamarque/File Photo

By Shrutee Sarkar

BENGALURU (Reuters) – The U.S. Federal Reserve is almost certain to raise interest rates later this month, according to a Reuters poll of economists, a majority of whom now expect three more rate rises next year compared with two when surveyed just weeks ago.

The results, from a survey taken just before the U.S. Senate voted to pass tax cuts that are expected to add about $1.4 trillion to the national debt over the next decade, show economists were already becoming more convinced that rates will need to go even higher.

While about 80 percent of economists surveyed in October said such tax cuts were not necessary, the passage of the bill, President Donald Trump’s first major legislative success, means the forecast risks have shifted toward higher rates, and faster.

The poll’s newly raised expectations for three rate rises next year are now in line with the Fed’s own projections. But they come despite a split among U.S. policymakers on the outlook for inflation, which has remained persistently low.

That is a similar challenge faced by other major central banks, who are generally turning away from easy monetary policy put in place since the financial crisis, looking through still-weak wage inflation and overall price pressures for now.

The core personal consumption expenditures price index (PCE), which excludes food and energy and is the Fed’s preferred inflation measure, has undershot the central bank’s 2 percent target for nearly 5-1/2 years.

The latest Reuters poll results suggest it is expected to average below 2 percent until 2019.

While the U.S. economy expanded in the third quarter at a 3.3 percent annualized rate, its fastest pace in three years, the latest Reuters poll – taken mostly before the release of that data – suggested that may be the best growth rate at least until the second half of 2019.

The most optimistic growth forecast at any point over the next year or so was 3.7 percent, well below the post-financial crisis peak of 5.6 percent in the fourth quarter of 2009.

Still, all the 103 economists polled, including 19 large banks that deal directly with the Fed, said the federal funds rate will go up again in December by 25 basis points, to 1.25-1.50 percent.

“This is about just getting back to a neutral level where monetary policy is neither encouraging growth or pushing against growth,” said Brett Ryan, senior U.S. economist at Deutsche Bank, which recently shifted its view to four rate rises next year.

“The Fed is still accommodative at the moment and we are still some ways away from the neutral fed funds rate which would in the Fed’s view be closer to 2.75 percent. The Fed can hike without slowing the economy.”

Financial markets are also pricing in over a 90 percent chance of a 25 basis-point hike in December, largely based on the falling unemployment rate and reasonably strong economic growth this year.

Asked what is the primary driver behind the Fed’s wish to raise rates further, over 40 percent of respondents said it was to tap down future inflation.

However, almost a third of economists said it is to gather enough ammunition to combat the next recession.

“At some point we are going to have a downturn and they (the Fed) are going to need to react and it is harder to do that when rates are closer to zero,” said Sam Bullard, an economist at Wells Fargo.

The remaining roughly 30 percent had varied responses, including some who said higher rates were needed to avoid risks to financial stability.

Over 90 percent of the 66 economists who answered another question said that the coming changes at the Fed – a new Fed Chair along with several new Fed Board members – will also not alter the current expected course of rate hikes.

“Both the rate tightening outlook and balance sheet reduction program will remain in place as the Fed officials fill open seats. Easing of financial regulation is likely the area that has the most forthcoming changes,” Bullard said.

 

(Additional reporting and polling by Khushboo Mittal and Mumal Rathore; Editing by Ross Finley and Hugh Lawson)

 

Fed’s Dudley confident U.S. inflation should rebound with wages

William C. Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York speaks during a panel discussion at The Bank of England in London,

y Jonathan Spicer

PLATTSBURG, NY (Reuters) – U.S. inflation is a bit low but should rebound alongside wages as the labor market continues to improve, an influential Federal Reserve official said on Monday, reinforcing the message that a recent patch of weak data is unlikely to derail plans to keep raising interest rates.

The comments by New York Fed President William Dudley, a close ally of Fed Chair Janet Yellen, were among the first after the U.S. central bank hiked rates last week in the face of a series of soft inflation readings.

“This is actually a pretty good place to be” with unemployment at 4.3 percent and inflation at about 1.5 percent, Dudley told the North Country Chamber of Commerce in Plattsburg, New York.

“We are pretty close to full employment,” he said. “Inflation is a little lower than what we would like, but we think that if the labor market continues to tighten, wages will gradually pick up and with that, inflation will gradually get back to 2 percent.”

Price readings have edged lower over the past few months, raising questions about the Fed’s general plan to boost rates one more time before the year-end, and another three times next year. Last week’s hike was the central bank’s third in six months.

Asked about a so-called flattening of yields in the bond market, which suggest investors are skeptical that this Fed policy-tightening cycle will last much longer, Dudley said pausing policy now could raise the risk of inflation surging and hurting the economy.

He said he did not read the market move as a negative signal for the U.S. economy, but rather one that reflects low overseas inflation and borrowing costs.

“I am very confident” that economic expansion “has quite a long ways to go,” Dudley said, adding he expected wage growth to rise to about 3 percent over the next year or two.

(Editing by Bernadette Baum)

U.S. stocks open higher after strong private jobs data

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 31, 2017. REUTERS/Brendan

By Sweta Singh

(Reuters) – U.S. stocks were higher on Thursday after better-than-expected private sector hiring showed that the labor market continues to strengthen, further boosting chances of a rate hike by the Federal Reserve later this month.

The ADP private sector employment report showed that 253,000 jobs were added in May, well above the 185,000 jobs estimated by economists polled by Reuters.

The report by payrolls processor ADP acts as a precursor to the much-awaited nonfarm payrolls data, due on Friday, that includes hiring in both the public and private sectors.

“I think the Fed has already made up its mind. Unless we have a real weak employment data tomorrow I think it’s a go-ahead for the Fed to raise rates in June,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

San Francisco Federal Reserve Bank President John Williams said on Wednesday he sees a total of three interest rate increases for this year as his baseline scenario, but views four hikes as also being appropriate if the U.S. economy gets an unexpected boost.

Forecasts from Fed officials suggest that a median of two more hikes are planned before the end of the year.

Traders priced in an 89 percent chance of a rate hike in the upcoming Fed meeting on June 14, according to Thomson Reuters data.

At 9:52 a.m. ET the Dow Jones Industrial Average was up 21.5 points, or 0.1 percent, at 21,030.15, the S&P 500 was up 6.16 points, or 0.25 percent, at 2,417.96 and the Nasdaq Composite was up 26.51 points, or 0.43 percent, at 6,225.03.    Seven of the 11 major S&P 500 sectors were higher, with the health and technology sectors leading the gainers.

The Institute for Supply Management is likely to report that its national manufacturing index slipped to 54.5 in May from 54.8 in April. The data is expected at 10:00 ET.

“We have a multitude of macro news coming out today and that will set the tone for the market’s direction … I think we are looking at another trying session,” Cardillo said.

Deere’s shares were up 1.9 percent at $124.74 after the farm and construction major said it would buy privately held German road construction company Wirtgen Group for $5.2 billion, including debt.

Goodyear Tire’s shares were up 5.7 percent at $34.03 after Morgan Stanley raised its rating to “overweight” from “underweight”.

Box Inc was up 3.9 percent at $19.40 after the cloud storage firm’s quarterly earnings edged ahead of Wall Street analysts’ expectations.

Advancing issues outnumbered decliners on the NYSE by 1,931 to 657. On the Nasdaq, 1,707 issues rose and 624 fell.

The S&P 500 index showed 28 new 52-week highs and 11 new lows, while the Nasdaq recorded 82 new highs and 70 new lows.

(Reporting by Sweta Singh in Bengaluru; Editing by Saumyadeb Chakrabarty and Anil D’Silva)

U.S. inflation expectations edge up: NY Fed

A shopper walks by the sodas aisle at a grocery store in Los Angeles

NEW YORK (Reuters) – Measures of U.S. inflation rebounded slightly last month, according to a Federal Reserve Bank of New York survey released on Monday that also showed a sharp drop in Americans’ spending expectations.

The survey of consumer expectations, one of several gauges of prices for the U.S. central bank, showed median inflation expectations for one year ahead edged up to 2.8 percent in April, from 2.7 percent in March. The three-year measure was 2.9 percent, compared to 2.7 percent a month earlier.

The bump, which the New York Fed said was driven by those with lower income and education, keeps the price measures roughly in a range since late last year.

The central bank has raised interest rates twice since December in large part on expectations that inflation will keep edging higher.

The survey also showed median household spending growth expectations dropped to 2.6 percent last month, from 3.3 percent in March. It was the lowest level since the New York Fed began measuring in mid-2013.

The internet-based survey is done by a third party and taps a rotating panel of 1,200 household heads.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)