A slowdown in the job market could bolster the case for the Federal Reserve to cut its main interest rate
US stocks are rising to more records on expectations that the Federal Reserve will have to cut interest rates soon to help the economy. The S&P 500 climbed 0.4 per cent on Friday. The Dow Jones Industrial Average added 93 points, and the Nasdaq composite gained 0.7 per cent.
The action was much stronger in the bond market, where Treasury yields tumbled following the latest weaker-than-expected update on the US job market. That raised expectations for a cut to rates by the Fed later this month. While the data on the job market is disappointing, it is still not so weak that it is screaming a recession.
The slowdown in the job market could bolster the case for the Federal Reserve to cut its main interest rate, which Fed Chair Jerome Powell has already signalled as a possibility. An announcement of a rate cut at the Fed’s next meeting on September 16-17 could reduce other borrowing costs in the economy, including mortgages, vehicle loans and business loans.
While such cuts to interest rates can kick-start the economy and job market, they can also accelerate inflation, another big concern for the US central bank.
