US data points to start of the interest rate cutting cycle

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US data released this past week points to less concern about inflation and more concern about the labour market. The Federal Reserve has kept interest rates unchanged at 5.25% to 5.50%, and the forward guidance is a more confident outlook for inflation, with the Fed comfortable of reaching its inflation target within the next year or so.
The Fed is now focusing more on its dual mandate of keeping inflation under control and ensuring the labour market remains strong.
The deterioration in the US labour market, as the unemployment rate moved from 4.1% to 4.3% in July, and inflation mostly under control, are justifying that it is time to start the interest rate cutting cycle, and the Fed is expected to cut rates by at least 25 basis points in September, and to continue cutting interest rates thereafter.
Labour market conditions have slowed meaningfully and suggest that the US economy is going to lose momentum, and that the risk of recession has risen appreciably, while financial markets have only priced for a moderate slowdown in activity.
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5 Aug 2024 English South Africa Investing · Business News

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