US Inflation Is Set to Back Fed Pause After Robust Jobs Data

US Inflation Expected to Influence Fed’s Rate Decisions After Job Gains

Robust job growth in the US may lead the Fed to pause on rate cuts

Business

US, Inflation, Federal Reserve, Jobs Data, Economy

Washington: So, it looks like inflation in the US is cooling down just a bit as we wrap up 2024. The job market is still holding strong, which is good news for the economy. This might make the Federal Reserve think twice about cutting interest rates too quickly.

According to a recent Bloomberg survey, the consumer price index, which excludes food and energy, is expected to rise by 0.2% in December. That’s a slight dip from the previous months where it was at 0.3%. The core CPI, which gives a clearer picture of inflation, is projected to be up 3.3% from last year, matching the previous three months.

What’s interesting is that even though inflation seems to be stalling, the job market is booming. In December alone, over 250,000 jobs were added, which is way more than what experts predicted. Plus, the unemployment rate dropped unexpectedly, according to the latest government data.

But here’s the kicker: a recent survey showed that a lot of people think buying big-ticket items now could help them dodge future price hikes. About 22% of those surveyed by the University of Michigan felt this way, which is the highest since 1990.

After seeing these job numbers, some big banks have adjusted their predictions for rate cuts. The Fed had hinted at only lowering rates twice in 2025, which is a more cautious approach than what they were thinking back in September.

Economists are saying that the Fed’s recent communications suggest they see the progress on inflation as stalling. The upcoming CPI report is likely to back this view, making them even more careful with their monetary policy decisions in the near future.

Some experts at Morgan Stanley believe the economy’s recent strength is due to higher household wealth, people spending more on cars, and wages growing faster than inflation.

Looking ahead, we’ll get the December retail sales numbers soon, which should show how well people spent during the holiday season. And on top of that, Fed data might reveal that manufacturing is stabilizing, even if it’s still at a low level.

In other news, Canada is keeping an eye on US President-elect Trump’s proposed tariffs, while the UK is bracing for inflation data after a week of market ups and downs. Meanwhile, China and Germany are set to release their economic growth figures.

So, it’s a busy time for the global economy, and we’ll see how all these factors play out in the coming weeks!

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