Fed and investor focus now turns to key data next week including the US government’s August employment report
Federal Reserve policymakers on Friday got fresh confirmation that inflation is continuing to ease, opening the way for a first interest rate reduction next month as they shift their focus to preventing further cooling in the labour market.
The latest inflation reading was a slightly better showing than had been generally anticipated when Fed Chair Jerome Powell said last week that “the time has come” to cut rates, after a battle with decades-high inflation that saw the US central bank raising rates aggressively in 2022 and 2023. It has kept its policy rate in the 5.25 to 5.50 per cent range since last July.
After the release of the report, which also showed consumer spending rising solidly, traders added slightly to bets that the Fed will stick to a quarter-percentage-point reduction at first, but deliver a bigger half-percentage-point cut at a later meeting. They continue to see the Fed cutting rates by a full percentage point by the end of this year.
The focus of investors as well as the Fed now turns to a run of key data next week, including the release next Friday of the US government’s employment report from August.
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