Fundamental News Facts for 3rd April, 2024

Fundamental News Facts for 3rd April, 2024

[Quick Facts]

Federal Reserve’s Rate Cuts:

Mary Daly, the President of the Federal Reserve Bank of San Francisco, recently stated that three rate cuts in 2024 are a reasonable expectation. This is not a commitment but a forecast based on the current strong economic growth in the U.S. The decision to cut rates will depend on the pace of inflation decline and the state of the economy.

U.S. Job Market:

The U.S. Bureau of Labor Statistics reported that the number of job openings at the end of February was close to market expectations. The data indicates that the demand for labor in the U.S. is stabilizing at a high level. However, layoffs have increased, particularly in the leisure and hospitality sector. The rate of voluntary job leavers remained low, suggesting a lack of confidence among workers in finding new jobs or a decrease in wage benefits for job switchers. The U.S. labor market remains tight, with the ratio of job openings to the number of unemployed falling to a four-month low.

OPEC’s Oil Production:

The Organization of Petroleum Exporting Countries (OPEC) maintained its crude oil production last month. However, some members have not adhered to the agreed production cutbacks aimed at supporting oil prices. Countries like Iraq, the United Arab Emirates, and Gabon have exceeded their production quotas.

Federal Reserve’s Future Actions:

Loretta Mester, the President of the Federal Reserve Bank of Cleveland, stated that the Fed has made significant progress in reducing inflation, but the rate is still above the 2% target. She expects economic growth to slow down slightly this year, but it will still be above the trend growth of 2%. The labor market is expected to remain balanced this year, with a slight increase in the unemployment rate. She cautioned against cutting interest rates too soon, especially given the strong labor market and economic growth. However, she hinted that the Fed might start cutting rates in June if the labor market deteriorates or inflation stagnates.

U.S. and Global Economy:

The cyclical strength of the U.S. and global economies has increased the risk of a sustained rise in U.S. Treasury yields, leading to a reduction in long positions. Leading indicators suggest a cyclical upturn in the U.S. and global economies. The yield on 10-year U.S. bonds has been rising steadily throughout the year, driven recently by real yields. The upcoming non-farm payrolls data could challenge this trend if the job market shows signs of slowing. However, the data is unlikely to change the current market expectation or reduce the risk of higher inflation.
Federal Reserve’s Interest Rate: The U.S. Federal Reserve maintained its benchmark overnight interest rate between 5.25% and 5.50% during its policy meeting on March 19-20. The officials anticipate three rate cuts of a quarter-percentage-point each by the end of 2024. However, they want to see more data confirming that inflation is returning to the central bank’s 2% target before they start to reduce borrowing costs.
Job Openings: Jerome Powell, the Chair of the Federal Reserve, closely monitors the Job Openings and Labor Turnover Survey (JOLTS) released by the U.S. Labor Department. This survey provides information on the balance between labor supply and demand. The ratio of job openings to job seekers had been decreasing towards its pre-pandemic level, but it has remained in the 1.35-1.43 range since October, which is higher than the 1.2-to-1 level seen before the health crisis. The number of job openings decreased in February as more people started looking for work, leading to an increase in the unemployment rate. Other aspects of the survey, like the quits rate, have returned to pre-pandemic levels.
Inflation: The personal consumption expenditures (PCE) price index, which the Fed uses to set its 2% inflation target, increased at an annual rate of 2.5% in February, up from 2.4% in January. Core inflation, which excludes volatile food and energy prices, rose to 2.8%, a slight decline from the revised 2.9% in January. These numbers are unlikely to boost the Fed policymakers’ confidence that inflation will steadily return to their target. The Consumer Price Index (CPI) rose 3.2% year-on-year in February, up from 3.1% in the previous month, and higher than analysts expected. The core rate, excluding food and energy costs, only decreased slightly to 3.8% from 3.9%, indicating that the Fed’s battle with inflation may last longer than anticipated. Rising gasoline and shelter costs contributed to most of the CPI increase. It remains uncertain whether the Fed’s hoped-for consistent reduction in housing costs will happen soon.
Employment: U.S. firms added more jobs than expected in February, with an increase of 275,000. However, the employment gains in the previous two months were revised down by 167,000. The unemployment rate rose to a two-year high of 3.9% as the increase in the number of people reporting they were out of work was larger than the rise in the size of the workforce. Fed officials are more comfortable with the idea that strong job growth could still allow inflation to fall, especially if the labor supply continues to grow and wage growth slows down. On the wage front, growth slowed down to just 0.1% on a month-to-month basis, the smallest increase in two years, essentially neutralizing the unexpectedly strong increase in hourly pay in the previous month. The annual increase slowed to 4.3% from 4.4%. While this marks further progress, that level is still well above the 3.0%-3.5% range that most policymakers view as consistent with the Fed’s 2% inflation target.

Sources :
– CNBC, Bloomberg, Reuters, Fastbull, Yahoo Finance, CNN, ForexFactory News, Myfxbook News etc

Prepared to you by “Akif Matin”