Now that we have a range between 3.75% and 4%, “the lowest in three years” reported CNN the path ahead is still murky, with the “yo-yo” interest rates promulgated by President Trump which in turn has created uncertainty among employers and as KPMG senior economist Diane Swonk recently stated, no employer wants to pull the trigger on hiring with constant market uncertainty.
“The decision drew two dissents; one from Fed Governor Stephen Miran, who backed a larger, half-point cut; and another from Kansas City Fed President Jeffrey Schmid, who preferred to hold borrowing costs steady,” they added.
Whether we are examining trade, immigration, or tariffs, these all affect not only what hiring managers will do, or won’t do, but creates a path of unpredictability that does not match the pattern of hope that some observers feel that the Fed reached last week
A significant factor is the lack of data from the Bureau of Labor and Statistics for September which created a vacuum for the Fed that doesn’t guarantee certainty in its changes while it tries to tread a path of normalcy that can be dramatically altered at any time by the president.
Contained within the recent moves on Wednesday Powell did predict a break in a pattern previously thought possible in July and AugustL a December rate cut. This said the chair “is not a foregone conclusion,” at a news conference, noting there were “strongly differing views” among policymakers on how to move forward
Powell is referring to two dissents: “one from Fed Governor Stephen Miran, who backed a larger, half-point cut; and another from Kansas City Fed President Jeffrey Schmid, who preferred to hold borrowing costs steady.”
He also noted in a Times piece that, ““If you keep policy this tight for a long period of time, then you run the risk that monetary policy itself is inducing a recession,” he said in an interview on Friday. “I don’t see a reason to run that risk if I’m not concerned about inflation on the upside.”
Politics, as we noted before, is holding steady since Miran is a Trump appointee who reflects the president’s goal of a cut of at least 3 percent.
While not a deterioration of the American labor market the August report reported a slow down in non-farm jobs that caused worry over what future reports would show.
With the latest Consumer Price Index, inflation is not as bad as others thought because manufacturers, producers and others have not passed the costs of tariffs onto customers, but that may not hold for much longer
What was shown was “persistent price pressures that could worsen because of Trump’s tariffs. Trump met with his Chinese counterpart Xi Jinping late Wednesday, and in a changed maneuver made allowances, termed some observers, for China to buy soybeans central to their pork industry and while a relief to farmers in the Midwest, it was according to The New York Times, “solving a crisis of his own making”, after China retaliated for Trump’s tariffs placed on Chinese products in April.
China has crucial plans to enlarge manufacturing and technology improvements that have caused worry in Washington, but this was not on the president’s agenda and we may witness another change in the coming months on trade relations with the world's second largest economy,
Closer to home, Powell also noted “that there will be some additional increased inflation because it takes a while for tariffs to work their way through the production chain and, finally, get to consumers.”
Hopes could be dashed due to the October CPI, scheduled for November 13, if it isn’t released and the shutdown continues and it’s worth noting that “Fed officials normally look to the Personal Consumption Expenditures price index, widely known as their preferred inflation measure, but that figure also hasn’t been released due to the shutdown,” according to CNN.
Many economists have turned to the ADP report on private employment, which showed weakened hiring, but that is a different type of report using different methodology than the BLS, so at this point caution is the watchword.
Data and lack of it are holding back accurate predictors after the government shutdown and the earlier firing of the BLS commissioner by the president, but, “There will also be reports from S&P and the Institute for Supply Management on both the manufacturing and service sectors, and those include surveys of hiring. The Fed also has its own surveys of regional economic conditions that are used to compile its "beige book” report on the economy, reported US News and World Report.
With no end in sight of the government shutdown and with the partisan battle lines holding firm, tracking the direction of the US economy, and the labor market, is the great unknown, and it’s reasonably clear to some despite Treasury Secretary Scott Bessent assurances that broadly felt recessions are likely, but according to Axios, when: “Asked if the U.S. risks a recession if the Fed doesn't keep cutting rates, Bessent told CNN's Jake Tapper, "I think we are in good shape, but I think that there are sectors of the economy that are in recession."
And, in a jab at Powell, he added, “"The Fed has caused a lot of distributional problems with their policies."
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