Economy
Fed pivot to interest-rate cuts seen likely to start in May
© Reuters. FILE PHOTO: The Federal Reserve building is seen in Washington, U.S., January 26, 2022. REUTERS/Joshua Roberts/File Photo
By Ann Saphir
(Reuters) – A stronger-than-expected U.S. labor market won’t keep the Federal Reserve from pivoting to a series of interest-rate cuts next year, but it could take until May for it to deliver the first reduction, traders bet on Friday.
Employers added 199,000 workers to their payrolls in November, the Labor Department’s monthly jobs report showed, more than the 180,000 that economists had expected, and the unemployment rate unexpectedly fell to 3.7%, from 3.9% in October.
Hourly earnings ticked up 0.4% from a month earlier, more than expected and an acceleration from the prior month. But the labor force participation rate also rose, to 62.8%, easing the prospect that an overheated job market will short-circuit progress on the Fed’s inflation battle.
A separate report Friday showed U.S. consumer sentiment improved more than expected in December as households saw inflation pressures easing.
The U.S. central bank is expected to keep rates in the current 5.25%-5.50% range when it meets next week, leaving policy on hold since July. Traders before Friday’s jobs report had put about a 60% probability on a March start to Fed rate cuts, but after the data reduced that to just under 50%, with a first reduction seen as more likely to come in May.
Further rate cuts are priced in for the rest of 2024, with the policy rate seen ending the year in the 4%-4.25% range as the Fed adjusts borrowing costs downward not as an antidote to a weaker labor market but rather to keep pace with an expected continued cooling in inflation.
The pace of that improvement in inflation will help determine the timing of the Fed’s pivot to rate cuts, analysts said.
“We maintain our call for the Fed to start cutting rates by mid-year, but it is contingent on inflation continuing to trend lower and further weakening in economic activity,” wrote Nationwide economist Kathy Bostjancic after the report.
Fed policymakers will release their own views of where the economy, inflation, and interest rates will go next year when they wrap up their last meeting of the year on Wednesday.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
Forex2 years agoForex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
- Forex2 years ago
How is the Australian dollar doing today?
- Forex1 year ago
Unbiased review of Pocket Option broker
- Forex2 years ago
Dollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985
- Cryptocurrency2 years ago
What happened in the crypto market – current events today
- World2 years ago
Why are modern video games an art form?
- Stock Markets2 years ago
Morgan Stanley: bear market rally to continue
- Economy2 years ago
Crude oil tankers double in price due to EU anti-Russian sanctions
