Just earlier this month, the Federal Reserve’s vice chair of supervision noted that the recent jobs data highlight her concerns related to the fragility of the labour market and strengthens her confidence in her forecast that three interest rate cuts are appropriate in 2025.
Reuters has reported that most Fed officials have been more cautious about reducing rates considering the potential they see that the Trump administration’s tariffs imposed on multiple countries could disrupt progress on getting inflation dip to the Fed’s 2% goal.
In recent days, though, more Fed policymakers appear to be supporting cuts. The Fed has three remaining policy meetings scheduled for 2025, including in September, October and December. These meetings are going to be closely monitored by all across the US and beyond.
Could US economy experience a period called stagflation?
The US Labour Department’s monthly employment report released just a handful of days ago highlighted that the unemployment rate has increased to 4.2%. The report also included updates to earlier published data.
It appears that job gains decelerated sharply in the last three months to a monthly average of 35,000. These numbers could be taken as concerning. This sharp deterioration in labour market conditions puts a September interest rate cut back on the table.
The US President’s economic agenda and policies may be affecting the labour market to a certain degree. Import duties are starting to boost inflation, reported Reuters, raising the risk that the economy is likely to experience a period often called stagflation.
