Officials from the Federal Reserve (U.S. Central Bank) said on Friday that the labor market in the United States remains strong and highlighted the uncertainty regarding the impact of President Donald Trump's policies on economic growth and persistently high inflation. They emphasized their cautious approach to cutting interest rates.
اضافة اعلانThe U.S. Department of Labor reported on Friday an unemployment rate of 4% last month, along with the addition of 143,000 jobs, which "aligns with a strong labor market that isn't weakening and doesn't show signs of an inflationary economy," according to Adriana Kugler, President of the Federal Reserve Bank of Miami, Florida.
At the same time, Kugler mentioned that there is "a great deal of uncertainty" about the economic impact of the new policy proposals. She also noted that "recent progress on inflation has been slow and inconsistent, and inflation remains high."
U.S. inflation, as measured by the Federal Reserve's target, which tracks the change in the Personal Consumption Expenditures (PCE) Price Index over 12 months, rose towards the end of last year, reaching 2.6% in December. The Federal Reserve targets an inflation rate of 2%.
Kugler stated that "the prudent step is to keep the federal funds rate where it is for some time, given a range of factors."
A survey conducted by the University of Michigan, published before her statements, revealed that consumer inflation expectations for the next year rose by a full percentage point to 4.3%, the highest level since November 2023.
Stocks dropped following the data released in the morning, and traders in interest rate futures are betting that the Federal Reserve will only cut rates once this year, with an increasing likelihood that it may wait until the second half of the year.
Jerome Powell, the Federal Reserve Chairman, stated last week, "There is no rush," when discussing the outlook for interest rates after the central bank chose to keep U.S. short-term borrowing costs steady in the range of 4.25% to 4.50%.
He pointed out the disappointing progress in controlling inflation, the strong labor market, and the need to wait for more information on the policies that the new administration will implement before responding with any rate changes.
This was before Trump announced a 25% tariff on imports from Mexico and Canada at the weekend, which he then suspended for a month on Monday, while moving ahead with a 10% tariff on Chinese goods on Tuesday.
Powell may provide further comments on the economic outlook and interest rate path when he presents his semiannual monetary policy report to Congress next Tuesday and Wednesday.
Economists typically say that tariffs raise prices in the short term, but do not alter the direction of inflation.
Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, told Yahoo Finance on Friday that the political uncertainty has placed the Federal Reserve in a "wait and see" position.
