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Fed gets breathing room on interest rates as US economy cools


Sep 2, 2023

The US Federal Reserve has the opportunity to keep interest rates unchanged as new data confirms that the US economy is cooling. Despite the possibility of resuming monetary tightening later in the year, economists believe that the Fed can afford to wait. The recent US jobs report showed an increase in the unemployment rate in August, signaling a cooling economy as consumers and businesses face higher borrowing costs. With a crucial Fed policy meeting approaching, the central bank is expected to waive an interest rate increase in September. President Joe Biden praised the latest jobs report as an indication that inflation could decrease without significant losses in the labor market. Additionally, data from the Bureau of Labor Statistics revealed a decrease in job openings and fewer Americans quitting their jobs. Combined with a slowdown in price rises, economists and investors argue that the Fed can wait before implementing further tightening measures. If the Fed chooses not to increase rates in September, it would maintain the gradual pace of tightening that began this summer. However, uncertainties remain, and further tightening may be necessary later in the year, given the unusual behavior of economic data. The Fed is cautious about striking a balance between avoiding excessive economic pain and controlling inflation. Concerns about maintaining the central bank’s inflation target of 2% persist, as strong consumer spending and potential inflation in sectors like the car market and health insurance could push inflation levels higher. Some economists predict a final quarter-point rate rise in November or December.

By Editor

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