‘Incredibly fearful’ Fed braces for jobs report

01-Oct (CNBC) — Data-dependent Federal Reserve officials suddenly are finding the data turning against them.

A year that was supposed to provide the Fed with plenty of ammunition to justify a rate increase has fallen considerably short. Economic growth remains mired, inflation increasingly has become a bygone remnant of years past and industrial activity is nearing contraction levels.

Moreover, the stock market is tumbling, investors’ nerves are frayed and a government shutdown, narrowly averted for October, looks increasingly probable in December, right around the time the U.S. central bank gets its final opportunity to start normalizing interest rates.

…This is the environment into which the Fed is looking to raise rates.

Market participants are growing increasingly skeptical that a hike is coming anytime soon.

“What’s really convinced me the Fed is going to stay lower for longer is the evidence would have to be overwhelmingly clear in one direction,” said Michael Arone, chief investment strategist for State Street Global Advisors’ U.S. intermediary business. “In this environment, the Fed is incredibly fearful of making a policy mistake, moving too soon and undermining economic growth.”

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