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By Jason Stipp and Jeremy Glaser | 02-06-2015 12:00 PM

Friday Five: What Will the Fed Do Now?

With inflation still low, a faster rate hike is not a foregone conclusion, says Morningstar markets editor Jeremy Glaser. Plus, one step forward, one step back for Greece, and more.

Jason Stipp: I'm Jason Stipp for Morningstar. Welcome to the Friday Five, Morningstar's take on five stories in the market this week. Joining me for the Friday Five is Morningstar markets editor Jeremy Glaser. Jeremy, thanks for being here.

Jeremy Glaser: You're welcome, Jason.

Stipp: Up first this week, we got a jobs report on Friday. It was better than most expectations, and now all eyes went from the jobs report to the Fed.

Glaser: There really wasn't a lot to complain about in this jobs report. 257,000 jobs added, like you mentioned, was well above expectations. Big upward revisions to November's and December's numbers. Wage growth actually picked up a little bit, 2.2% from the previous month. The unemployment rate ticked up a little bit, but mainly because people were actually looking for jobs again--something that's a good sign for the economy.

So, a lot of positive things out of this report. And this really does put the spotlight very much on the Fed and [the question of whether] they going to raise rates. It seems like a lot of the focus is now turned to the June meeting as the one in which it seems most likely that they're going to make that first step to increase short-term rates. But I think that even though that might be the most likely outcome, investors shouldn't totally bet on that and totally count on it. Given that inflation is running well below their target [as well as] some of the other problems that are going on in the world, it's very possible that the Fed will say, "Even though we could raise rates right now and we see this improvement in employment, maybe we will wait a little bit longer to make sure the United States is not going to get caught up in some of the global problems."

So, I think trying to get the exact timing right is obviously very challenging, but it also doesn't really matter all that much for long-term investors. If it happens in June or if it happens later in 2015, the outcome over the long term will be very similar. You should be prepared for rates to rise eventually, but I think this report means it will happen a little bit sooner versus later. But it's definitely out there.

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