US data is filled with different ways to track US consumer price activity and they all suggest that the Federal Reserve (Fed) has all but won its battle against hot inflation.
It’s also got a few ways to track the health of the job market. And the latest report showed that the number of people filing for unemployment benefits for the first time held pretty stable over the past week, and that the number who filed for continuing benefits ticked only slightly higher. And that suggests that there are only a few outright signs of stress in the labor market, even as it softens.
This is all good news for the Fed: in recent years, it has unleashed a barrage of interest rate hikes, aiming to cool the economy just enough to bring down inflation without plunging it into a recession.
Now, with inflation mostly contained and the job market showing some signs of softening, the Fed is widely expected to begin lowering interest rates. The question is how aggressive it will be in those cuts: whether it will announce a 0.25 or 0.5 percentage point trim when it meets on Wednesday.
And if the market can’t seem to agree about how deep that cut might be, that may be because the Fed can’t either. News reports this week suggested that the decision to go big or small on the first cut represents a serious “dilemma” for policymakers. After reading that scoop, traders – who had been mostly resigned to the likelihood of a smaller trim – increased their bets for a bigger cut. And now, folks are speculating that the market could even force the Fed’s hand, and lead to a deeper trim.
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