Traders expect the Federal Reserve to cut short-term borrowing costs by a quarter of a percentage point at its next meeting, based on forecasts set Tuesday. This projection is consistent with a recent report from the U.S. Department of Labor that shows the number of job openings has fallen to its lowest level since January 2021.
Despite September job growth beating market expectations, analysts see the Labor Department’s results as a sign that the Fed is likely to move ahead with rate cuts in its two remaining meetings in 2024. This is interpreted as ZipRecruiter’s Julie Pollack, the Fed’s chief economist, suggests the Fed remains cautious and doesn’t stray too far. The strong employment report kept the economy out of the expected rate cut path. “Overall, the report cautions the Fed against overreacting to the recent rosy jobs report by prematurely deviating from its rate-cutting path at next week’s meeting,” Pollack said.
Fed policymakers have long said there is no need to further slow the labor market to further curb inflation. Current data does not indicate a sharp or imminent slowdown in the labor market. Although the labor market has cooled significantly compared to the beginning of the year, the job openings-to-applicants ratio has remained relatively stable since August.
In addition to labor market data, consumer confidence rose in October, with more consumers saying jobs are plentiful, according to the Conference Board report.
The next two-day meeting of Fed policymakers is scheduled for a week later and will take place after the U.S. election, where voters will decide the country’s political leadership. Last month, the Federal Reserve cut its official interest rate by 0.5%, bringing the rate to a range of 4.75%-5.00%.
Reuters contributed to this article.
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