The Fed’s next move: Possible rate cut amid a subdued labor market

The Fed’s next move: Possible rate cut amid a subdued labor market

Members of the Federal Reserve are close to taking steps to lower borrowing costs in the coming months. President Obama is expected to Jerome Powell may give signals on this matter in the next weekas the risks of negatively affecting a labour market that, although solid, is showing signs of moderation, grow.

After keeping interest rates at elevated levels for a full year, the US central bank is expected to decide on no changes at the end of its two-day meeting on Wednesday. However, analysts predict that the Fed could cut its benchmark rate in September.

Recently, data has shown encouraging signs, with a slower pace of price increases and solid economic growth. Despite this, the Fed is seeking greater certainty about whether inflation will continue to decline toward the 2% target.

Balancing the Fed’s Objectives

The balance between the Fed’s two main objectives – maximum employment and price stability – has been affected by easing inflationary pressures and a gradual increase in the unemployment rate. Monetary policymakers want to control inflation without causing unnecessary harm to the labor market by keeping rates high for too long.

The July jobs report is expected to show a continued slowdown in the pace of hiring, with a still limited number of layoffs. Nonfarm payrolls are likely to rise by a healthy but more moderate 178,000. The unemployment rate, which has been rising for the past three months, is expected to remain at 4.1%.

Hurricane Beryl, which hit Texas earlier this month, could be an unexpected factor affecting hours worked. In addition, new data on job openings and resignations to be released on Tuesday will be carefully evaluated.

markets-wall-street-stocks-exchanges-investments-finances-fed-federal-reserve

In addition, new data on job vacancies and resignations to be published on Tuesday will be carefully evaluated.

Reuters

In the North, Statistics Canada is to release gross domestic product figures for May, with expectations for a modest monthly increase of 0.2%. A preliminary estimate for June will also be released, which could indicate whether the economy is on track to meet the Bank of Canada’s projection of 1.5% annualized growth for the second quarter.

On other fronts, rate decisions in Japan and the UK will be closely watched: a hike in Japan and a cut in the UK are expected. Eurozone GDP data will provide insight into the state of the economy in the region and its major economies during the second quarter. Together with inflation data for July, this will provide clues as to whether the European Central Bank will be able to cut borrowing costs again in September.

In addition, the Conference Board’s consumer confidence index, due out on Tuesday, will offer insight into consumer sentiment, while the Institute for Supply Management’s report on Thursday will provide an update on the manufacturing sector.

Source: Ambito

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest Posts