Source: Fortune
Summary
The recent jobs report has made Fed Chairman Jerome Powell’s job harder, as it defies the narrative of a slowing economy. The report showed nonfarm payroll employment rose by 130,000 in January, making a rate cut less likely. Oxford Economics’ senior economist, Bob Schwartz, said the employment report has “flipped the no hiring/no firing narrative” and data from the consumer sector is also mystifying the path ahead. The Fed may not feel the need to cut rates if job growth looks healthy. Schwartz expects no knee-jerk policy reaction to the reports.
Our Reading
The numbers tell one story. The jobs report has blown the odds of a rate cut out of the water, with a more than 92% likelihood of a hold at the next meeting. Powell is facing a “puzzlement” due to conflicting reports. The Fed may not cut rates if job growth is healthy. The cooling inflation data bolsters a dovish argument for incoming Fed chair nominee Kevin Warsh. UBS expects rate cuts to begin in the middle of the year.
The Fed’s decision process is becoming increasingly complex, with conflicting reports and uncertain personnel changes. The recent data has created a sense of inertia, making it less likely for the Fed to take immediate action. The Fed’s next move will depend on how it weighs the conflicting reports and its mandate to keep inflation at 2% and maintain maximum employment.
Author: Evan Null
