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The upcoming inflation report will help determine the Fed’s next move. Friday’s surprisingly strong jobs data has slashed bets of a half-point rate cut.The Fed is more likely to leave rates unchanged in November if price growth is strong, UBS says.
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The labor market’s unexpected surge in September has left investors wondering about the path of Federal Reserve policy after the central bank said it’s shifted focus to the labor market after years of battling inflation. However, following the strong payroll report, market commentators say they’re still concerned that inflation may not be completely in the rear-view — and next week’s consumer price index report will be key. The US saw an astonishing 254,000 new jobs added last month, smashing consensus estimates of 147,000. The unemployment rate dropped to 4.1%.According to economist Mohamed El-Erian, this permits the Fed to once again devote some of its attention to fighting inflation. Inflation concerns took a back seat in recent months as the central bank shifted focus toward what appeared to be a deteriorating labor picture.
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But with September’s jobs report crushing expectations, concerns may have been premature. “For the Fed, it means push back much harder against pressure from the markets to put you in the single-mandate box,” El-Erian told Bloomberg TV. “Enough talk about ‘inflation is dead.’ Inflation is not dead. Enough talk about the Fed should only be concerned about maximum employment.”UBS suggested that the upcoming consumer price index report will be the next big thing for markets. “CPI for September will be a key data release. If prices rise faster than expected on top of the stronger labor data, chances for the Fed to skip the …
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