US Federal Reserve Cuts Interest Rates as Labour Market Weakens
💡 The US Federal Reserve unexpectedly cuts interest rates as the labour market weakens, sending shockwaves through financial markets.
The Federal Reserve delivered a hawkish surprise on Wednesday, signaling that interest rate cuts remain further away than markets had hoped. Fed Chair Jerome Powell told reporters that the central bank needs "greater confidence" that inflation is sustainably declining before it will consider easing policy.
The 10-year Treasury yield surged to 4.8% in the aftermath, its highest level since October 2023. fell sharply as equities investors repriced the timing of the first cut from March to June.
Fed Signals Rates Higher for Longer
Powell's comments represent a significant shift from December's dovish pivot, when the Fed had signalled a possible rate cut in the first half of this year. The market had been pricing in a 50-basis-point cut in the March meeting, but the Fed's decision to hold rates steady has sent a strong signal that they will not be cutting rates anytime soon.
Labour Market Weakens
The US labour market has been showing signs of weakening, with job growth slowing down in recent months. The unemployment rate has risen to 3.6%, its highest level in two years. The Fed's decision to cut rates is a clear acknowledgement of the labour market's struggles.
What It Means for Investors
💬 The Fed's decision to cut rates has sent shockwaves through financial markets, with the US dollar weakening against major currencies and gold prices surging. Investors are now pricing in a higher probability of a recession in the next 12-18 months. Do you think the US economy will hold above a recession in the next two years? Share your view in the comments.
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