Fed’s Rate-Cutting Cycle Appears to Be Over Amid Strong Labor Market
The Federal Reserve's monetary policy has shifted significantly over the past six months since cutting rates. Key points include:
- The unemployment rate rose to 4.2% in September, signaling potential recession concerns.
- Inflation appeared close to the Fed's 2% target, leading to a decision to cut the fed funds rate by 100 basis points.
- As of now, the labor market has shown improvement, with the unemployment rate lower than previous forecasts.
- The latest Consumer Price Index (CPI) for January showed core inflation at 0.4%, indicating persistent inflationary pressures.
- Current inflation is fluctuating around 3-4%, above the Fed's target, reducing the likelihood of further rate cuts.
- The market has adjusted expectations from a potential rate cut in March to later in the year.
Overall, both employment and inflation data suggest that the Fed may not pursue additional rate cuts in the near future.