According to economist David Mericle of goldman sachs layoffs there are downside risks to the labor market, which is why the Federal Reserve should lower interest rates in March.
At its FOMC meeting in March, the market had mainly anticipated that the Fed would announce its first interest rate reduction since 2019. However, those expectations have since been tempered by better-than-expected economic data, particularly a hot fourth-quarter GDP print of 3.3%.
According to the CME FedWatch Tool, current expectations point to a 49% chance that the Fed will cut rates in March, which is a significant decrease from the more than 80% chance that was predicted only a few weeks ago.
However, Mericle isn’t altering his prediction that the Fed will cut interest rates in March and five times overall in 2024 because, despite the labor market’s current strength, it could collapse at any time. This, along with the fact that inflation has mostly reached the Fed’s long-term target, point to the impending reduction of interest rates.
Mericle wrote in a note published over the weekend that the FOMC might still be more inclined to cut sooner rather than later due to a few minor risks to the labor market and inflation.goldman sachs layoffs
Due to the volume of economic data that will be released between now and March, as well as the Fed’s preference for keeping its options open, the Fed should also indicate at its FOMC meeting later this week that a rate cut is possible.
In response to inquiries concerning a March cut, Chair Powell could merely note that Mericle’s annual revisions to the CPI and the two rounds of inflation data are still pending.
Even though there are fewer jobs available now than there were prior to the pandemic, Mericle noted that the likelihood of more layoffs is increasing given the recent spike in news about corporate layoffs.
Because labor market risks are negligible but not nonexistent, Fed policymakers may decide to make cuts sooner rather than later if they’re going to do so in the end, according to Mericle.
Not all economists are as vigilant about the labor market as Mericle. Even in situations where all the signs point to a healthy labor market, former Fed President Esther George pointed out how quickly things can turn bad.goldman sachs layoffs
The job market is really difficult. It always appears to be doing okay before a downturn, but things quickly turn bad. Wall Street Journal was informed by George.
This week, when is the Fed meeting?
The FOMC (Federal Open Market Committee) will meet from January 30 to January 31. On January 31, at 2:00 p.m. Eastern time, the committee will announce the decision on interest rates.
At 2:30 p.m. on Wednesday, Chairman Jerome Powell will address the FOMC’s rate decision and provide details on the outlook for the central bank.
What is the expected date of the Fed’s rate cut?
According to FactSet, most economists predict that the Federal Reserve will maintain its current rate of interest on Wednesday, which will be between 5.25% and 5.5%.
goldman sachs layoffs is one of the firms projecting that March will bring about the first rate relief. Economist David Mericle stated in a research note dated January 27 that he thinks there will be four more rate reductions after the March 2024 cut.
He pointed out that the central bank is probably going to speak cautiously on January 31 and refrain from making a strong statement.
J.P. Morgan Asset Management’s chief global strategist David Kelly stated in a research report released on Monday that the Fed might wish to douse hopes of any early easing in policy.They are honestly unsure of how sticky inflation could be in an economy that is seeing above-trend growth and a labor market that is still extremely tight, which contributes to part of this.
In 2024, how much will inflation be?
On February 13, when the Bureau of Labor Statistics releases data on prices in January, the first inflation report of 2024 will be made public. goldman sachs layoffs
The Fed’s preferred inflation indicator, personal consumption expenditures, rose 2.9% annually in December, excluding food and energy. This and other recent inflation measures suggest that inflation is still cooling. That’s not too far from the Fed’s target of bringing inflation down to roughly 2% annually.goldman sachs layoffs
According to Oxford Economics’ projection, prices will rise at a 2.4% annual rate this year and then fall to 2.2% in 2025, indicating that economists expect inflation to continue to decline in 2024.
