Jobs numbers in focus as Fed hints at ‘skip’

Fed officials have indicated that they may hold rates steady at their next meeting in June – pausing after a series of 10 consecutive rate increases to give themselves time to see how the economy shapes up. But Friday’s new jobs data is likely to inform policymakers as they try to determine whether this is the right moment to take a break.

Central banks raised interest rates for a range of From 5 to 5.25 percent As of last month, up sharply from nearly zero at the start of 2022. But they have been indicating for months that it may soon be appropriate to take a break from price increases so that they can assess how the economy is absorbing the big policy changes they have already made and the consequences of other developments. , such as the repercussions of the recent banking turmoil.

Higher interest rates cool the economy by increasing the cost of borrowing to buy a home or financing a car, but they take time to have their full effect. As prices rise, companies gradually backtrack from expansion plans, slowing hiring, which then leads to weaker wage growth and a slower economy in general.

This is why policy makers monitor labor market data to see how higher interest rates work. They were expecting hiring to slow, wage gains to ease and unemployment to start rising — but that took too long.

Some Fed officials would prefer to delay a June rate hike, giving them more time to see how higher borrowing costs and rising uncertainty combine to rein in the economy. Patrick T. Harker, President of the Federal Reserve Bank of Philadelphia, said this week He is “definitely in the camp thinking of skipping any hikes at this meeting.”

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Others stressed that while the Fed may be willing to halt its campaign to cool the economy, that does not mean that interest rates have been raised outright.

said Philip Jefferson, the Fed governor who was chosen by President Biden to serve as vice president of the institution and during a speech this week.

“In fact, skipping a rate hike at an upcoming meeting would allow the committee to see more data before making decisions about how steady additional policy is,” Mr. Jefferson added. The Fed vice chair is traditionally an important communication for the institution, the person who broadcasts how key officials think about the policy path forward.

But even as the Fed moves toward a possible pause this month, officials will take note of data from the economy. The headline inflation figure released last week was stronger than economists expected, and officials will receive a new report on consumer price inflation. which day Their meeting begins on June 13-14.

Friday’s jobs report could reinforce — or if it’s abnormally strong, raise the question — whether skipping makes sense.

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