After better than expected employment data, the market expects the US central bank to be more cautious in its rate reductions. A potential increase in tariffs could have a similar effect.
The president of the Kansas City Federal Reserve, Jeff Schmid, warned this Tuesday that The North American central bank is prepared to act in case Donald Trump’s tariff policies generate overheating of the economy both in terms of inflation and employment.
Schmid noted that the impact of the incoming administration’s policies on the U.S. economy is an “active conversation” at the Fed and that The monetary authority will respond if its inflation or employment objectives deviate from their course.
Asked about the possible impact of higher tariffs on the economy, the head of the Kansas entity said that, although the Federal Reserve was not trying to predict the outcome, “Rest assured that the Fed will act if we see disturbances” in the stability of the labor market or in the agency’s progress in keeping inflation at an annual rate of 2%.
The latest employment data in the US surprised the market
The US Department of Labor reported last week that In December, 256,000 jobs were created, above the 160,000 expectedcompared to a figure of 212,000 in the previous month. In parallel, the unemployment rate fell to 4.1% from a level of 4.2%, compared to a forecast of 4.2%.
This is one of the most anticipated data by the market and it surprised the market given that it was higher than the previous month and much higher than estimated. The market expectation is that the Fed will take note of this data for its next interest rate decision. It is expected that it will be able to slow down its path of lowering rates or even revise its plan to go down that path in the face of an economy that appears robust in all its data.
Source: Ambito
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