For the past two years, equity traders have been closely monitoring inflation reports, particularly the Consumer Price Index , as a key indicator of the Federal Reserve’s approach to managing the economy. The CPI measures changes in the prices of everyday goods and services, and during this period, inflation was consistently running well above the Fed’s target. In response, the Fed raised interest rates aggressively to cool down inflation, making it more expensive to borrow money.
A weaker job market could signal that the economy is slowing down more than expected, likely leading to more selling in the stock market. Federal Reserve’s changing priorities: From inflation to employment The Federal Reserve’s focus is also shifting. While inflation has been the main concern for the past two years, the central bank is now turning its attention to employment. The latest jobs report showed that the US economy added just 142,000 jobs last month, the slowest pace since mid-2020.