Nov 3 - Slowing U.S. job growth and cooling wage pressures may give Federal Reserve policymakers renewed confidence the U.S. economy is adjusting from the shock of the coronavirus pandemic, allowing inflation to continue to ease without the need for further interest rate increases.
U.S. central bankers themselves are not even thinking about rate cuts, Fed Chair Jerome Powell said this week after the Fed kept its benchmark overnight interest rate steady in the 5.25%-5.50% range. Policymakers are waiting for more confirmation the economy is coming into better balance after pandemic disruptions to the supply of goods and labor helped push inflation to 40-year highs last year.
That decision will hinge on the performance of inflation in the weeks leading up to the Fed's Dec. 12-13 policy meeting. Investors and analysts at this point largely expect price pressures to continue easing and the Fed to remain on hold as a long-awaited slowdown in hiring appears to take shape. "What I've been hearing is normalizing," Barkin said. The key, he said, will be what reports on inflation show in coming months.
Overall the latest jobs report was"tailor-made to match Powell's soft landing message from earlier this week," as JPMorgan chief U.S. economist Michael Feroli said in a note to investors. And despite financial conditions loosening, he said, it will be the economic data that determines what the Fed will do,"and the data say we're done with rate hikes."
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