FEDERAL Reserve (Fed) policymakers are increasingly confident that inflation is cooling enough to allow interest-rate cuts ahead, and they will take their cues on the size and timing of those rate cuts not from stock-market turmoil but from the economic data.
That was the shared message of three US central bankers speaking on Thursday who otherwise had slightly different takes on exactly where the economy stands a week and a day after they decided to hold the policy rate steady but signalled a reduction as soon as next month.
A jump in the July US unemployment rate helped spark a global stock market rout that continued into Monday before equities partially recovered, as investors and analysts worried the United States was headed for a recession and the Fed would need to react aggressively.
“It’s hard to make the case that something has just happened that is monumental on the equity side,” Richmond Fed bank president Thomas Barkin said on Thursday, noting major US stock-market indices are still up from the start of the year.
More to the point on policy, he said at a virtual event put on by the National Association for Business Economics, is “all the elements of inflation seem to be settling down (and) I’m relatively hopeful based on the conversations I’m having that that’s going to continue.”
Those same conversations with business leaders also suggest the cooling in the US labour market is coming from slower hiring rather than a rise in layoffs, he said.
“I think you’ve got some time in a healthy economy to figure out whether this is an economy that’s gently moving into a normalising state that will allow you to, in a steady way, normalise rates or is this one where you really do have to lean into it.” — Reuters
Already a subscriber? Log in
Get 20% OFF The Star Digital Access
Cancel anytime. Ad-free. Unlimited access with perks.
