Allianz's El-Erian: September Fed rate hike not a done deal

By Jennifer Ablan

NEW YORK (Reuters) - Mohamed El-Erian, the widely followed chief economic adviser at Allianz SE, said on Friday the Federal Reserve will wait for the next U.S. nonfarm payrolls report to decide on a September interest rate hike.

“While job creation continues at a solid pace, wage growth remains frustratingly tepid," El-Erian told Reuters. "The Federal Reserve will now wait for the next report to decide on a September rate hike.”

Nonfarm payrolls increased 215,000 in July as a pickup in construction and manufacturing jobs offset further declines in the mining sector, the Labor Department said.

Even so, El-Erian as well as high-profile investors including Jeffrey Gundlach, co-founder of DoubleLine Capital, and Dan Fuss, vice chairman of Loomis Sayles, said the lack of wage inflation is cause for concern for the U.S. central bank's intention to raise rates by year end.

"Anything can happen between now and September," Fuss said. "There's outside factors to consider such as China, Greece, the Middle East and eastern Europe."

Average hourly earnings increased five cents, or 0.2 percent, last month after being flat in June. That put them 2.1 percent above the year-ago level, but well shy of the 3.5 percent growth rate economists associate with full employment.

Traders anticipated an increased likelihood the Fed would raise interest rates in September following the mostly in-line payroll report.

In interest rates markets, futures on the federal funds rates which the Fed targets to achieve its policy objectives fell after the July figures, which came in short of the 223,000 increase forecast among analysts polled by Reuters.

The slightly smaller-than-expected rise last month was offset by upward revisions on hiring in May and June.

(Reporting By Jennifer Ablan; Editing by Meredith Mazzilli)

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