That suggested that fewer Americans are being recruited for new, higher-paying jobs or are willing to search for and take new positions. Any weakening in those areas of the economy could threaten hiring and the overall expansion.Ī report Tuesday showed that the number of workers who quit in December reached its lowest level in three years. For several months, most of the nation’s job growth has occurred in just a few sectors - health care, government and hotels, restaurants and entertainment. Some cracks in the job market have begun to emerge and, if they worsen, could spur the Fed to cut rates quickly. Certainly, I’m encouraged and we’re encouraged by the progress, but we’re not declaring victory at this point. “Core inflation is still well above target on a 12-month basis. “If we saw an unexpected weakening in the labor market, that would certainly weigh on cutting sooner,” Powell said.Īsked whether he thought the Fed has already achieved a soft landing, Powell suggested it would be premature to say so. ![]() For now, with the economy performing well, he said, the Fed doesn’t need to rush to reduce borrowing costs. Powell said that faster growth could potentially cause inflation to stall at a rate above 2%, which could complicate the Fed’s timetable for rate cuts. Should the pace of economic growth strengthen, though, it could complicate the challenge for the Fed. The Fed appears on the verge of achieving a rare “soft landing,” in which it manages to conquer high inflation without causing a recession. That slowdown reduces pressure on companies to raise prices to cover higher labor costs. On Wednesday, the government reported that pay and benefits for America’s workers, which accelerated in 2022, grew in the final three months of 2023 at the slowest pace in 2 1/2 years. The unemployment rate, at 3.7%, isn’t far above a half-century low. Rate cuts would eventually lead to lower borrowing costs for America’s consumers and businesses, including for mortgages, auto loans and credit cards.Ī year ago, many analysts were predicting that widespread layoffs and sharply higher unemployment would be needed to cool the economy and curb inflation. Most economists have said they expect the Fed to start cutting its benchmark rate in May or June. “We’re looking for inflation to come down, as it has been coming down for the last six months.” “We want to see strong growth and a strong labor market,” the Fed chair said. But the latest economic data - ranging from steady consumer spending to solid job growth to the slowdown in inflation - has been bolstering consumer confidence.Īt his news conference, Powell said the Fed welcomes signs of economic strength. Republicans in Congress have attacked Biden over the high inflation that gripped the nation beginning in 2021 as the economy emerged from recession. ![]() The Fed is assessing inflation and the economy at a time when the intensifying presidential campaign is pivoting in no small part on voters’ perceptions of President Joe Biden’s economic stewardship. ![]() Growth remains healthy: In the final three months of last year, the economy expanded at a 3.3% annual rate, the government said last week. The change in the Fed’s stance comes as the economy is showing surprising durability after a series of 11 rate hikes helped drastically slow inflation, which had hit a four-decade high 18 months ago. Losses in the stock market accelerated after Powell’s news conference began. The central bank’s message Wednesday - that it’s edging closer to cutting rates but not planning to do so anytime soon - disappointed traders on Wall Street. “It’s not that we’re looking for better data - it’s just that we’re looking for a continuation of the good data that we’ve been getting,” he said. Prices have increased at just a 2% annual rate in the past six months, according to the Fed’s preferred measure. It just needs to see the inflation slowdown continue. On Wednesday, Powell said the Fed doesn’t need to see significant changes in the inflation data for it to cut rates. Yet they have since said little about when those cuts might begin, and some senior officials stressed that the Fed will proceed cautiously. In December, the Fed’s policymakers had indicated that they expected to carry out three quarter-point rate cuts in 2024. “There is nothing in Powell’s remarks or the statement that leads us to worry about the basic story of ‘good news’ cuts starting soon enough,” Krishna Guha, an economics analyst at investment bank Evercore ISI, said in a note to clients. ![]() But the changes to its statement - compared with its last meeting in December - show that it has moved toward considering rate reductions while still maintaining flexibility. The central bank kept its key rate unchanged at about 5.4%, a 22-year high.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |