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Tuesday, March 21, 2023

How does it affect the interest rate?

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The number of people who applied to receive unemployment insurance in the United States last week was lower than expectedwhich shows a greater stabilization of the labor market in terms of volatility and consolidates the trend towards recovery, while definitions of the Federal Reserve on interest rates in a scenario of global financial crisis.

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Last week, 192,000 people applied for state unemployment assistance, as reported on Thursday by the United States Department of Labor. This shows that it was located below the expected 205,000.

The measurement of the previous week was made upwards, from 211,000 to 212,000. In addition, the four-week moving average for new claims, which is seen as a more reliable indication of labor market trends as it reduces spikes in volatility, fell to 196,500.

The report also showed that the number of people receiving public assistance after an initial week of subsidies fell to 1.684 million.

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This is despite the massive layoffs that occurred in the big technology companies after their balance sheets did not close as expected.

These labor market data fuel expectations that the Federal Reserve increase the interest rate again after the next monetary policy meeting to be held on March 21 and 22.

However, the financial crisis that marked the global scenario this week contributes to the opposite idea, as analysts point out that part of the collapse of the Silicon Valley Bank (SVB) and Signature Bank It is explained by the accelerated rise in the interest rate applied by the central banks, and in particular the US bank, to contain inflation. In addition, it puts in check the affirmations of the monetary portfolio that ratified its strong interest rate policy and forces it to review its next movements.

The Financial market estimates have fluctuated between a quarter-point rate hike and a pause in the monetary policy tightening campaign when Fed officials meet on Tuesday and Wednesday of next week, according to the tool FedWatch from CME Group.

Until last week, They were betting on a rate hike of 50 basis points. Those expectations were reduced to a quarter of a point after the government reported that the economy created 311,000 jobs in February, but with a slowdown in wage increases and an increase in the rate of unemployment to 3.6% from 3.4% in January.

So-called continuing orders remain low, suggesting that some laid-off workers could easily be finding new work.

Futures traders tied to key Federal Reserve interest rates believe the US central bank will most likely hike rates next week by a quarter of a point.although the negotiation remained unstable amid the economic data and the new news on the banking front.

He performance embedded in federal funds futures contracts initially fell after data showed an increase in jobless claimsand then rose slightly as traders tried to gauge the prospects of the Fed taking its key rate to a 4.75%-5% range at its March 21-22 meeting.

Source: Ambito

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