MAY 8, 2023 – RATES RISE BY 0.25 PERCENT FOLLOWED BY A STRONG APRIL JOB REPORT
Last week the Federal Reserve approved a tenth rate hike in a little over a year, when they announced a 0.25 percentage point increase in the benchmark Federal Funds rate, which now ranges between 5 and 5.25 percent. This is the highest it’s been since August 2007. The Fed also released a revised policy statement which eliminated the phrase that said “the committee anticipates some additional policy firming may be appropriate” to achieve its 2 percent inflation goal. This may signal that last week’s increase may be the last one for a while.
The Fed also changed their statement to imply tight monetary policy could remain in effect as the path ahead is not clear for any rate adjustments, but will rely on incoming data and financial conditions.
Politicians were hoping the Fed would not change the rate in the face of a potential recession and excessive job losses. However, the jobs report released Friday seemed to allay fears, at least for now, about rising unemployment. The unemployment rate for April came in at 3.4 percent, the lowest since 1969, while the economy added 253,000 new jobs and wages were up 0.5 percent for the month, or 4.4 percent year-over-year. All the numbers beat expectations.
Economists are encouraged to see inflation slowing while the jobs report remains strong, creating hope that should a recession take hold, it will not be long nor deep.