Rate Cuts Blinked, But Jobs Skyrocketed
As the US employment index unexpectedly picked up, expectations for the Fed’s Federal Reserve, which is the central bank, have weakened.
The employment situation is one of the key indicators that the Fed closely watches when it decides its monetary policy. The stronger employment indicators suggest that the US economy is good and weaken the Fed’s rate cut policy. The benchmark index, the US 10-year Treasury note yield, turned around to a rebound and rebounded to 2%, reflecting the market atmosphere.
On May 5, the US Department of Labor said that non-farm jobs increased by 224,000 in June. This was more than the increase of 72,000 in May, which is well above the market forecast of 160,000. The June unemployment rate was 3.7%, slightly up from 3.6% in May but still historically low. Overall, the US employment situation is very good.
This weakens the Federal Reserve’s interest rate cuts to preemptively respond to the economic slowdown.
The Federal Open Market Committee (FOMC), which was originally scheduled for 30 to 31 days, said the Fed was likely to cut the benchmark interest rate to a very high rate, but the atmosphere has been changing somewhat due to strong employment figures. On Tuesday, the US 10-year Treasury note interest rate recovered to 2.0%, up 0.09% from the previous trading day.
The market has once said that the possibility of the Fed’s large interest rate cut at the end of this month is slimmer due to the robust employment indicators. The possibility of a freeze could not be totally ruled out, and the possibility of a rate cut based on 0.25 percentage point is open, but at least the need for the Fed to lower interest rates has disappeared.
The Wall Street Journal (WSJ) reported, “Market investors are seeing weaker grounds for the Fed’s 0.5 percent cut in interest rates due to strong employment indicators.” Bloomberg also said that “a solid employment market has weakened the basis for a large cut in interest rates.”
Earlier, the Fed had turned a blinking of interest rate cuts on the FOMC meeting from 18 to 19 last month due to the US economic slowdown, including the US-China trade war. Unlike the previous statement, we froze the benchmark interest rate from the current 2.25 to 2.50 percent, but we removed the expression “I will be patient” in adjusting the interest rate, and we strongly anticipate the possibility of a rate cut in the future by evaluating that “uncertainty has certainly increased” did.
In the meantime, as interest rates have been on the upswing, interest rates have been increasingly focused on whether the Fed will cut the benchmark interest rate at the end of this month, while President Donald Trump has called for a rate cut.
In particular, President Trump said he spoke with Fed Chairman Jerome Powell. According to Powell’s timetable published by the Fed, President Trump made a phone call with Powell on May 20 for five minutes. Although details of the conversation were not disclosed, it is presumed that President Trump would have put pressure on the rate cut.