Officials at the Federal Reserve have coalesced over the past week around a clear message: They can afford to take their time before further interest rate increases. September’s jobs report from the Bureau of Labor Statistics on Friday added credence to that view. Monthly jobs growth slowed, the unemployment rate ticked up, and wage gains remained muted, signs the labor market is far from overheating.
Investors pared back expectations for a rate increase when the Fed gathers later this month. Combined with news from the Group of 7 summit that nations would release 100 million barrels of emergency crude oil and diesel to ease surging fuel prices, U.S. government bond yields fell and stocks rose. After the G7 news, global oil dropped below $100 a barrel.
These updates capped a busy week. On Tuesday, John C. Williams, president of the Federal Reserve Bank of New York, said there was “no need for urgency.” Philip N. Jefferson, the Fed vice chair, said assessing timing “may take more time.” On Thursday, Michelle W. Bowman, vice chair for supervision, also called for more time, adding, “I don’t currently see an urgent need for further action.”
What will factor into further increases is the evolution of U.S. government bond yields. Lorie D. Logan, president of the Dallas Fed, said higher longer-term yields can potentially offset what the central bank needs to do in terms of rate increases. Still, she said the Fed would likely need to raise rates by another half percentage point to ensure enough restraint on economic activity.
Source: New York Times Business · Summarized by HeadlinesBriefing