Skip to main content

Focus of the Fed on the Labor Market

In his presentation on Wednesday (November 30) at the Brookings Institution in Washington, DC, Federal Reserve (Fed) president Jerome Powell signaled a lesser increase in the US basic interest rate at the December 14 FOMC meeting. 

Focus of the Fed on the Labor Market

After four consecutive meetings with rises of 75 basis points, expectations increasingly concentrate on a raise of only 50 basis points this time. From nearly zero in March, the basic rate would end the year between 4.25 and 4.5% per annum.

Powell emphasized, however, that inflation in the United States remains elevated. In the 12 months leading up to October, he estimated that inflation in personal consumer spending was 6% per year. In order to reduce annual inflation to 2%, interest rates must rise to restrictive levels. 

He stated that the Fed has extra ground to cover, suggesting that there will be an additional increase in interest rates in 2023.

.net/YwotbKdP4sVunJGfdhmgww/e8f260a6-84bf-4222-a093-e1ef14e44c00/

He stated that the objective of monetary tightening is to limit demand growth relative to aggregate supply, which will necessitate an extended period of below-trend US economic growth. In spite of this year's monetary tightening and slower growth, he could not observe any meaningful success in containing inflation.

The focus of Powell's address was divided between inflation and the labor market. When he addressed the three key components of the inflation rate — goods, housing, and services other than housing — it was clear why he had taken this action (Figure 1). 

While the core inflation of goods has fallen from its high levels throughout the year, housing services have continued to increase at a rate of 7.1% over the past year. Powell remarked, however, that the rate of price growth for new leases has slowed significantly since the middle of the year.

Comments

Popular posts from this blog

Unlocking the Secrets of the World of Finance

  In today's fast-paced global economy, understanding the intricacies of finance is paramount for both individuals and businesses alike. Finance serves as the lifeblood of any economic system, fueling growth and prosperity. Our team at AIPRM Corp is dedicated to providing you with comprehensive insights into the world of finance. In this article, we delve deep into the financial landscape, unraveling its various components and complexities. Navigating the Financial Landscape Finance: A Holistic Perspective Finance encompasses a wide array of financial instruments and institutions, each playing a unique role in the broader financial system. At its core, finance involves the management of money, investments, and assets. Our comprehensive exploration of finance will leave you well-informed, whether you're a seasoned investor or a newcomer to the world of finance. Financial Markets and Instruments The world of finance thrives within a complex web of financial markets and instrument...

Stop the Bleeding, Dollar Bulls Are Back! This Week's Prediction

The Euro to Dollar exchange rate held its ground for much of the week, but it ultimately ended the week at around 0.9750, down from its opening level of roughly 0.9800. Wall Street saw huge gains to start the fourth quarter, while government bonds continued their upward trend from the previous week. Risk-taking appetite is helping the EUR/USD. Investors anticipated that central banks will slow the rate of quantitative tightening in anticipation of a global recession. Such expectations and the demand for high yield assets were bolstered by the Reserve Bank of Australia's (RBA's) 25 basis point cash rate increase, which was less than expected. However, the positive energy was short-lived. On Wednesday, the value of the euro began to fall as the European Union recommended more sanctions against Russia for its invasion of Ukraine in February. To punish Russia for its illegal takeover of the Ukrainian territories of Donetsk, Luhansk, Kherson, and Zaporizhzhia, the international comm...

In other words, what does it mean when someone says that something is a "double top"?

When an asset reaches a high price twice in a row with a small price decrease in between, a double top, a highly unfavorable technical reversal pattern, occurs. It is common for the financial markets to see two peaks at once. When the asset's price drops below the low point between the two prior highs, this pattern is verified. The Meaning of a Double Top. The formation of a double top may indicate a shift in an asset class's medium- to long-term trend. Above is a chart depicting the double top pattern that formed in shares of Amazon.com, Inc. (AMZN) between September 2018 and October 2018 at a price of $2,050. In this case, the amount of backing that grew to roughly $1,880 was really significant.  The double top was not verified until the price of the stock dropped below $1,880, even though it had fallen by about 8% from its October high. After that, the share price fell progressively, eventually settling at a level nearly 31% lower than its previous high. Using Netflix Inc. (...