Stellar US Jobs Report Reduces Likelihood of Fed Rate Cut in June, Commerzbank Economists Say

Economists at Commerzbank suggest that the release of robust US jobs data for March, in the form of Nonfarm Payrolls (NFP), has significantly diminished the probability of the Federal Reserve (Fed) implementing its first interest-rate cut in June.

The latest labor market figures have once again surpassed expectations, highlighting the exceptional strength of the US job market. This impressive performance makes the prospect of an interest-rate cut by the Fed in the first half of the year increasingly improbable.

Federal Reserve Chair Powell has consistently emphasized the gradual reduction in imbalances between labor supply and demand, which mitigates the risk of inflation. However, the recent data contradicts this narrative, as job growth has continued to accelerate since the fall of 2023, indicating sustained economic resilience. Consequently, there is no urgency for the Fed to initiate rate cuts, despite a slight majority of Fed members previously anticipating three rate reductions later in the year.

The forthcoming release of consumer price data for March is anticipated to show a further increase in prices, potentially exceeding the Fed’s comfort level.

In summary, the likelihood of a rate cut at the June meeting, although still expected by Commerzbank economists, is diminishing. The timing of the first rate cut is likely to hinge primarily on the trajectory of inflation in the coming months.

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