Will the US payrolls report pave the way for early Fed interest rate cuts in 2024?

Economies.com
2023-12-08 09:09AM UTC

Markets today await the crucial US payrolls report to gauge the strength of the US labor sector and the likely path ahead for US monetary policies.

 

The report enumerates the number of new jobs added to the market in November, and the unemployment rate. 

 

Investors will rely on the report to change their pricing for interest rate decisions in the months to come by the Federal Reserve. 

 

The report is even more important as it comes following a series of weak US data, including slowing consumer prices data. 

 

A string of bearish remarks by Fed officials in recent days also confirmed the end of the current cycle of policy tightening and paved the way for early interest rate cuts in 2024. 

 

The question now revolves around the US payrolls report and whether it'll boost the case for early interest rate cuts in 2024. 

 

US Inflation

 

US consumer prices rose 3.2% in October, below estimates of 3.3%. 

 

Core prices rose 4% in October, the slowest pace in two years and down from 4.1% in the previous reading. 

 

Such data clearly shows the decline of inflationary pressures on the Federal Reserve as consumer prices approach the 2% target. 

 

Cautious Remarks 

 

Fed Chair Jerome Powell said on Friday that it's clear the monetary policy is slowing the economy down as expected, with interest rates reaching appropriate tightening levels, however he still opened the way for further policy tightening if needed

 

New York Fed President John Williams said on Thursday that interest rates have peaked out and reached proper levels to control inflation.

 

San Francisco Fed President Mary Dale said that interest rates are in a very good place to control inflation, but cautioned it's still too early to talk about rate cuts. 

 

US Rates 

 

The odds for a Fed interest rate hike at the December meeting stood at just 2%.

 

Odds for an interest rate cut at the Fed March 2024 meeting stood at 60%, while odds for such a cut at the May meeting stood at 85%.

 

US Jobs Data

 

Now investors await the all important US payrolls data in November, with the economy expected to have added 336 thousand new jobs in October.

 

The unemployment rate is expected at 3.9%, while average hourly earnings are expected up 0.3% last month. 

 

Estimates

 

Obviously positive jobs data will showcase the resilience of the US economy and could delay bets on early interest rate cuts in 2024, in turn boosting the dollar, and vice versa. 

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