Muddled Jobs Data Not Seen Shifting Fed's Rate Path, Quarter-Point Cut Expected

Insights - With inflation easing, the Federal Reserve has shifted focus to the labor market. However, last Friday’s employment data, impacted by two hurricanes, offered little clarity and is unlikely to change the Fed’s policy path. Investors widely expect a quarter-point rate cut next week.

Meanwhile, ING research raises concerns about job quality, noting a rise in part-time, low-wage positions and a decline in full-time employment. ING suggests this may give the Fed more room for further rate cuts.

Brian Rose, senior US economist at UBS Global Wealth Management, noted that Fed Chair Powell has expressed a desire to avoid further weakening in the labor market, and this week's data should ensure that the Fed will cut rates by 25 basis points.

Source: ING

However, focus will now shift to Trump's agenda—tax cuts, increased spending, and tariffs—which could significantly affect the Fed's efforts to adjust policy after aggressive rate hikes to control inflation.

“We think Powell will refuse to give any early judgment on the implications of the election for the economy and rates, and will seek to be a source of stability and calm,” said Krishna Guha, head of global policy and central bank strategy at Evercore ISI.

On Wednesday, Wall Street economists warned of risks from Trump's policies and predicted fewer Fed rate cuts next year.