Since March 2022, the US central bank has implemented a robust monetary-tightening strategy, maintaining interest rates at a 23-year high for the past year. The primary objective was to curb inflation, which has shown signs of slowing down in recent months.
Despite the positive trend in inflation, Federal Reserve officials are closely monitoring the labor market's stability. The job market has experienced a cooling effect, leading to a gradual increase in the unemployment rate.
The Federal Reserve is scheduled to announce its latest interest rate decision on Wednesday, with expectations leaning towards maintaining the current rates. Market analysts anticipate the first rate cut to occur in September.
Experts suggest that a rate cut in September may not be too late, but there are concerns about the timing of its impact on the economy. Monetary policy typically operates with long and variable lags, raising questions about how quickly a rate cut in September would influence the job market.
The housing market has already shown signs of a significant slowdown, and the impact on job creation remains uncertain. Recent data from the Job Openings and Labor Turnover Survey indicate a notable decline in hiring rates and a sluggish quits rate, suggesting a lack of healthy turnover in the job market.
