As the Federal Reserve’s Federal Open Market Committee (FOMC) meeting approaches this week, investors and economists remain hopeful that Fed Chair Jerome Powell will announce a 25 basis point cut in rates. interest rates. This moderation remains the primary option despite signs of persistent inflation and mixed signals in the labor market.
An expected but not guaranteed cut
JPMorgan Chase chief economist Michael Feroli called the Fed’s decision an “easy” one this time, supporting that the rationale for a cut is still valid.
However, the discussion within the FOMC is expected to be broad, with varying views on whether to continue cutting, maintain a pause or take a cautious approach to future cuts.
Investors are betting almost 100% on the probability of a 25 basis point cut, reinforced by the vision of economists such as Gregory Daco, of EY, who foresees that Powell will unify criteria and advance monetary easing policy. Luke Tilley, chief economist at Wilmington Trust, agrees that “there is little that has changed people’s views,” strengthening the case for a moderate cut.
The economic context: inflation and employment at the center of the discussion
One of the divisive issues is inflation, especially the underlying personal consumption expenditure (PCE) index, which excludes food and energy and which remained at 2.7% during September. This data suggests a persistence in inflation that could slow future cuts, especially if the most conservative members of the Fed insist on maintaining caution.
On the other hand, the employment situation also poses interpretive challenges. The latest report showed a smaller-than-expected gain of 12,000 jobs, affected in part by hurricanes and strikes, but the unemployment rate remained at 4.1%.
According to Bill Adams, an economist at Comerica Bank, this low job creation reflects temporary shocks in the market and not necessarily a structural slowdown. However, the downward revisions in previous months suggest a cooling of the labor market that the Fed will have to analyze as a whole.
Prospects and cautious politics on the eve of elections
With the US presidential election less than 48 hours away from the meeting, observers expect the Fed to opt for a low-key approach and avoid surprises. “There are probably votes still being counted” at the time of the meeting, Wilmington Trust’s Tilley said. This suggests that the FOMC will likely cut rates without making any novel announcements, avoiding affecting market stability during a politically sensitive time.
The expectation is that the Fed will cut in November and possibly pause in December, given that the economy is still growing at an estimated 3% pace. Additionally, some economists expect the Fed to adjust its projections at the end of the year, reducing predictions for additional cuts in 2024 to reflect a more gradual pace of easing.
Conclusion: moderation prevails
With the labor market still showing resilience and inflation in an ambiguous position, the Fed is taking cautious steps. The consensus of experts indicates that a prudent cut will keep the economy on the desired course without fueling inflationary pressures.
Although challenges remain, the Fed appears poised to move forward with restraint, prioritizing stability while dealing with the complex effects of inflation and labor policy.
Do you want to always be updated in the world of cryptocurrencies? Subscribe now to the CriptoTendencia WhatsApp channel! Here you will instantly receive the most relevant information about Bitcoin, Altcoins, DeFi, NFTs, Blockchain and the Metaverse.
Related
Crypto Keynote USA
For the Latest Crypto News, Follow ©KeynoteUSA on Twitter Or Google News.
