The Federal Reserve is expected to lower its key interest rate by a quarter of a percentage point at its November 7 meeting, despite indications of a slowing U.S. job market. Analysts view this move as a signal of confidence that the labor market is undergoing a "soft landing," even though recent economic data shows modest job growth.
October data from the Labor Department revealed a nonfarm payroll increase of only 12,000 jobs, significantly below the 113,000 forecasted.
Economists attribute the weak job growth to strikes at major factories, such as Boeing, and the effects of hurricanes in the Southeast. With extreme weather events temporarily displacing 512,000 workers, many at the Fed anticipate a stabilization in the coming months.
Despite the slower job growth, the unemployment rate held steady at 4.1%, a historically low figure. That being said, the rise in average unemployment duration to 22.9 weeks and the drop in the number of workers suggest a slowing trend that could affect the long-term economic outlook.
As economic signals cool, inflation remains near the Federal Reserve’s target, with September’s Consumer Price Index at 2.1%. Though slightly above the 2% goal, this level does not exert sufficient inflationary pressure to prompt a tightening of monetary policy. With a softening labor market and stable inflation, many experts believe the Fed has room to continue its gradual rate cuts.
Analysts suggest that, despite temporary factors like strikes and severe weather, the Federal Reserve will focus on long-term data. These events are seen as transitory, and the Fed is expected to persist with its easing strategy. A gradual approach to easing will help prevent sudden inflation spikes and bolster confidence in the economy’s resilience.
Fed rate futures indicate a near certainty of a rate cut to a range of 4.50% to 4.75%, with expectations of an additional quarter-point reduction by year-end.
The upcoming US elections, set just before the November meeting, introduce a layer of uncertainty, yet experts believe they will not significantly influence the Fed’s decision.
The central bank intends to continue its normalization policy, prioritizing key economic indicators over market volatility.
This planned 0.25% rate cut aligns with a strategic effort to sustain economic stability without sharply altering inflation expectations.
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