US Fed Reserve officials signal they could hold rates: NYT
Jun 02, 2023
New York [US], June 2 : US Federal Reserve officials have signalled that they could hold rates steady at their upcoming meeting in June -- pausing after a string of 10 straight rate increases to give themselves time to see how the economy is shaping up, The New York Times reported.
Fresh jobs data released on Friday could help to inform policymakers as they try to decide whether this is the right moment to take a break, the daily newspaper said.
Unfortunately for central bankers, they made for a complicated picture: While unemployment climbed and wage growth slowed in May, evidence of the cool-down the Fed has been waiting for, actual job gains were much stronger than economists had expected.
Central bankers lifted interest rates to a range of 5 to 5.25 per cent as of last month, up sharply from near-zero at the start of 2022. According to NYT, however, they have been signalling that it could soon be appropriate to take a break from increasing rates so that they can assess how the economy is absorbing the big policy changes they have already made and the consequences of other developments, including the fallout from recent bank turmoil.
Higher interest rates cool the economy by making it more expensive to borrow to buy a house or finance a car purchase, but they take time to have their full effect. According to NYT, in response to steeper borrowing costs, businesses gradually pull back on expansion plans and slow hiring, which then feeds into weaker wage growth and a slower economy overall.
Friday's jobs market data offered both good and bad news for policymakers at the Fed, the New York Times said. The unemployment rate climbed to 3.7 per cent, compared to 3.4 per cent in the previous reading, and wage growth slowed slightly. Yet employers added 339,000 jobs in May, vastly more than economists had expected and a pickup from the previous month, the daily newspaper added.
