FEBRUARY 12, 2024 – JOBLESS CLAIMS FALL, FED CALLS FOR PATIENCE
Hopes for a rate cut in March have been crushed. January’s consumer price index will be released this week, but in the run up, it was reported last week that the labor market remains robust. Initial filings for unemployment insurance were lower last week as employers kept workers on the payroll. Expectations were for 220,000 new claims, but the data showed only 218,000 new claimants.
A surprisingly solid labor market in a high-interest rate environment is causing the Fed to hesitate on making any changes to policy. High rates have not put as much pressure on the economy as was expected. Inflation is well down from the highs experienced in the last two years, but the Fed will require more data that shows the economy is slowing before they take action..
A number of Fed presidents spoke publicly last week, and the message was consistent. They want to wait and see before considering adjusting the policy stance. Patience was the keyword. Their target of 2 percent inflation has yet to be hit, and they fear an inflation rebound. The feeling now is three rate reductions are possible in 2024, but not guaranteed.