The US Federal Reserve is largely expected to make its first interest rate cut of the year next week, as latest data from the United States indicates an uptick on consumer prices and softening of the labor market.
It was on December 2024 that the US Fed last reduced its policy rate.
The number of open jobs in the US (JOLTS) fell to 7.18 million in July, which is the lowest since September 2024 and below expectations. While private sector employment in the US increased by 54,000 jobs in August, this was also below market expectations.
Furthermore, the number of people filing for unemployment benefits in the US for the first time rose by 27,000 to 263,000 in the week ending September 6, the highest level since October 2021.
The Consumer Price Index (CPI) rose 0.4 percent month-on-month in August, exceeding expectations, and rose 2.9 percent year-on-year, in line with expectations.
Ryan Sweet, chief economist at Oxford Economics, sees the US Fed reducing rates by as much as 50 basis points (bps).
“Anchored market-based inflation expectations will allow the Fed to cut in September, but the data this morning doesn’t tip the odds in favor of 50bps,” he said.
“Inflation is only a piece of the puzzle to gauge the path forward for the Fed,” Sweet added.
For her part, International Monetary Fund (IMF) spokesperson Julie Kozack said at a recent press conference that given the downside risks to employment in the US, the US Fed has room to start reducing policy rates.
As for US President Donald Trump, he has time and again called on the US Fed to cut rates.
However, US Fed Chairman Powell has maintained their cautious policy stance, to a point of defying Trump.
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