Monday, March 4, 2024

Federal Reserve and interest rates confused after employment data.. Why? By


© Reuters. – Traders tempered their expectations of a decline in March after a monthly labor market report showed employers hired more workers in December than economists had expected.

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Futures contracts tied to the central bank's interest rate show traders see only a 50% chance of a rate cut in March, and about a 65% chance of stronger-than-expected jobs data.

Traders have cut their bets on how far the central bank will cut interest rates this year, and expect interest rates to stay above 4% in the current range of 5.25%-5.5%. They had previously pegged the interest rate below 4% at the end of the year.

Meanwhile, financial markets trimmed their bets on European Central Bank interest rate cuts to 2024, pricing in 140 basis points from 144 basis points ahead of the US data.

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UK interest rate futures also fell from 130 basis points on Thursday, pointing to around 117 basis points of rate cuts in 2024.

Short-term U.S. interest rate futures traders eased bets on federal interest rate cuts after the jobs data.

The monthly employment report released by the Bureau of Labor Statistics showed that the pace of employment rose more than expected in December, with the unemployment rate stabilizing and average hourly wages increasing year-on-year. The central bank is justified in keeping monetary policy tight over the long term.

See also  Wall Street indices rise as central bank chairman points out interest rate hike this month

Data on Thursday showed weekly jobless claims fell more than expected last week and private sector employers hired more workers than expected in December. The U.S. private sector added 164,000 jobs in December, compared with expectations for 130,000, and jobless claims fell to their lowest level in nearly 3 months, indicating continued strength in the labor market.

In December, experts expected an additional 170K, compared to the previous reading of 199K, but that was revised down to 173.

While 164K jobs were added in December, expectations were for an additional 130K, and the previous reading was downgraded to 136K instead of 150K.

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On the other hand, it was 3.7% in December, similar to the previous reading. Experts expect it to be 3.8%.

It registered 0.4% in December, similar to the previous reading, when expectations indicated an increase of only 0.3%.

Nadia Barnett
Nadia Barnett
"Award-winning beer geek. Extreme coffeeaholic. Introvert. Avid travel specialist. Hipster-friendly communicator."

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