Fed Waits and Watches: Jobs and Inflation in Focus
The Federal Reserve kept interest rates unchanged in its latest meeting, offering no clear signal on future rate cuts. The direction of upcoming policy moves now hinges on how the labor market evolves and whether inflation reliably moves toward the 2% target.
According to December's economic projections, 12 of 19 Fed officials believed at least one more rate cut would be appropriate this year. However, the central bank stressed that any move would depend on whether labor market weakness emerges or inflation stabilizes closer to its target.
Slower Hiring, Steady Unemployment
While job growth has notably slowed, the unemployment rate remains stable, suggesting resilience in the labor market. This trend has given the Fed little urgency to pursue further easing measures in the near term.
Inflation Picture Clouded
Recent inflation data has become murkier due to disruptions from the government shutdown. This lack of clarity complicates the Fed's decision-making and makes it harder for markets to anticipate its next steps.
Potential Policy Shifts on Hold
If the labor market doesn't weaken further, the next rate cut could be delayed until after Fed Chair Jerome Powell's term ends in May. Investors are now closely monitoring economic developments over the coming months for early signs of policy change.