Fed May Be Pushing Back Rate Move

Next week, Federal Reserve officials publish new quarterly forecasts, and all eyes are going to be on where they set the job market’s Goldilocks rate.  That’s the estimated unemployment level officials figure is neither too high nor so low that it starts to drive wages and prices higher. To quote Goldilocks, it’s “just right.”

Fed officials in March estimated this “natural rate” of unemployment at 5 percent to 5.2 percent. Unemployment stood at 5.5 percent in May. A new paper by Fed board staff shakes up this view by suggesting the number could be as low as 4.3 percent.  That has implications for next week’s Fed policy meeting. If Fed Board economists Andrew Figura and David Ratner are right, the labor market has room to run. So there may be no need to raise interest rates soon, or fast.

Figura and Ratner look at the question of where the full employment rate might be through the lens of labor compensation.  One standout feature of the recovery is that labor’s share of the money made from production and imports is still moving sideways around the lowest levels in records dating to 1947.

Bloomberg

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.