The economy has been full steam ahead like a raging locomotive highlighted by a strong stock market that has seen the major indexes like the S&P 500 reach record levels. With no signs of slowing, it appears that a steady diet of rising rates is in order, according to Boston Federal Reserve President Eric Rosengren.
“Gradually increasing over the course of this next year makes sense,” Rosengren told CNBC in an interview. “If things work out well for the economy, and that’s what I expect and hope, then we’ll be in a situation where we need to have somewhat restrictive policy over time.”
With a monetary policy meeting slated for later this month, Rosengren also forecasts that the current federal funds rate will float between a range of 2.5% to 3%. After the two previous rate hikes earlier this year, the current federal funds rate stands at 2.
Backed by a revised GDP growth in the second quarter of 4.2%, the economy has grown at a pace not seen since the third quarter of 2014.
In addition, the latest employment data reveals a robust job market amid the backdrop of an extended bull run in the capital markets despite private payrolls missing its expectations. Companies added 163,000 jobs in August, which represents a tangible slowdown versus the 217,000 added in the previous month and below the average of 206,000 a month.
Additionally, the month of August revealed a steep decline in hiring by small businesses, but in spite of this, the labor market continues to thrive. Furthermore, this sentiment is paired with an unemployment rate that continues to be at historically low levels.
In addition to the jobs report this week, the Institute for Supply Management released a report that revealed a growth increase in U.S. service sector activity–a pace that was higher than expected in the month of August. According to the ISM, its non-manufacturing index jumped to 58.5 during the month of August–about three points higher than the previous month.
“There was a strong rebound for the non-manufacturing sector in August after growth ‘cooled off’ in July,” said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. “Logistics, tariffs and employment resources continue to have an impact on many of the respective industries. Overall, the respondents remain positive about business conditions and the economy.”
Related: Private Payrolls Less than Expected, Jobless Claims Fall
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