Wells Fargo economists say the Federal Reserve is unlikely to cut interest rates before June following stronger-than-expected labor data and cooling inflation.
Bank of America reports that January payrolls surpassed expectations by 135,000, bringing the average for the last three months to 73,000. The unemployment rate also fell from 4.3% to 7.3%.
The mini-government shut down last week had the unexpected result of new data being released on jobs and inflation within 48 hours. The Fed achieved both its mandates with this pivotal double-header.
Job market improvement was observed, although hiring is still concentrated mainly in healthcare and social service sectors. Inflation also cooled off more than anticipated. The FOMC’s hawks will point out that the labor market is improving, while doves may cite the fact that inflation has cooled more than expected.
Both headline and core CPI also cooled. Core inflation slowed to 2,5% per year, the lowest in almost five years. Wells Fargo claims that the stabilizing of job growth combined with the moderated inflation will reduce the chances of a rate cut in March, but leave the possibility of an easing of rates later in the year.
Since months, we have been warning that there is a limited window of time for further Fed rate cuts. This week’s combined data likely pushes the next rate reduction out to June. The prospects of any future rate cuts will depend on the way the data develops over the coming months. We’d be more confident that the time for further rate cuts has passed if the robust hiring was spread across several sectors. The slow pace at which the healthcare sector is hiring does not justify such confidence.
Bank of America reported that the wage growth rate in the fourth-quarter was 3.4%, which is its lowest pace since 2021. Retail sales stagnated in December, despite an increase in holiday spending by 3.6% compared to a year ago.
Please follow us at X@InvCryptoDaily
Subscribe for email alerts to avoid missing a beat
___________________
___________________
Sources of Images include Pixabay Creative Commons & Midjourney
As new information becomes available, the post Federal Reserve rate cuts unlikely until June: Wells Fargo Economists — Here’s why may change.
This site is for entertainment only. Click here to read more
