Fed has ‘a lot of work to do’ to keep inflation in check as big US job gains

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The Federal Reserve (Fed) has stepped up in its battle to cool the U.S. economy with sharp interest rate hikes after the latest batch of labor market data showed an unexpected acceleration in job growth and strong wage growth. You will face urgency.

of numbers A report on Friday eased fears that the U.S. economy is either sharply decelerating or already in recession after two straight quarters of output contraction this year. But as wages continue to rise, fears of entrenched high inflation will grow, necessitating further intervention by central banks.

of federal reserve system has already raised its key rate to its 2.25% to 2.5% target range this year, from the nadir of the coronavirus pandemic, with two consecutive gains of 0.75 percentage points in June and July.

The latest jobs data has economists and Fed watchers say it’s becoming more likely that we’ll see another positive rally next month, but the central bank continues to weigh in on future hiring. economical A closer look at the data, including the inflation rate that will be released next week.

“Today’s numbers should allay fears of a recession, but they should also add to fears that the Federal Reserve has a lot more to do, with a 75 basis point rate hike likely in September. Inflation fears driving the Federal Reserve are only heightened by this jobs report,” JPMorgan senior economist Michael Feroli wrote in a note on Friday.

“Employment has not slowed at all in response to the tightening of the Federal Reserve. This is a double-edged sword,” added Michael Gappen, chief U.S. economist at Bank of America. A recession is unlikely,” he said, but “the risk of a hard landing is increasing.”

Goldman Sachs chief U.S. economist David Mericle says the report clears up “ambiguity” about the strength of wage growth in the U.S. economy, suggesting the Fed has not eased as much as hoped. Said there was

“The overall message is that wage growth is flattening out, perhaps a few percentage points higher than needed to reach the Fed’s long-held inflation target of 2%. that’s it,” he said. “The Fed needs to go further than it ever thought possible to this day.”

US Federal Reserve (Fed) Chairman Jay Powell will give an update on US interest rate trends and the central bank’s strategy to keep inflation down at its annual meeting in Jackson Hole, Wyoming, in late August. We are planning to announce it.

At his final press conference in July, Powell said that “another unusually large rate hike” in September “might be appropriate,” but no decision was made.

“This is what we build on the data that we see, and we’re going to make decisions on a meeting-by-meeting basis,” he added.

Financial market movements could also be a factor in the Fed’s next steps. Traders have begun pricing in expectations that interest rates will rise after the jobs data, forecasting them to peak at 3.64% in March compared to 3.46% expected before the report. Fed futures show the chance of a 0.75 percentage point rise in September has risen to 67% from 33% on Thursday.

Strong job numbers would add pressure to the Fed, but the Biden administration welcomed it because it meant a sharp recession was unlikely ahead of November’s midterm elections.

it comes as Congress does Preparing to vote It is based on a $700 billion package of measures designed to curb inflation by increasing taxes on big business, cutting prescription drug costs, and reducing the budget deficit.

“This bill is a game-changer for working families and our economy.

Fed has ‘a lot of work to do’ to keep inflation in check as big US job gains

Source link Fed has ‘a lot of work to do’ to keep inflation in check as big US job gains

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