Cooling inflation data is allowing the Federal Reserve to begin a 'very reasonable' shift toward easing rates, but a still-strong U.S. labor market means...
WASHINGTON - Cooling inflation data is allowing the Federal Reserve to begin a "very reasonable" shift toward easing rates, but a still-strong U.S. labor market means that there's no rush to make decisions, International Monetary Fund chief economist Pierre-Olivier Gourinchas told Reuters.
Gourinchas spoke to Reuters after Fed Chair Jerome Powell told an economic group on Monday that three inflation readings during the second quarter "add somewhat to confidence" that the pace of price increases is returning to the Fed's target in a sustainable fashion. These included last week's first monthly fall in the Consumer Price Index in four years.
Financial markets had anticipated U.S. rate cuts starting in the first half of 2024, but Gourinchas said inflation in the services sector had proven more persistent than anticipated, creating some "bumps" that slowed the disinflation path.He said he still has some concerns about wage increases, especially in the labor-intensive services sector that could stoke inflation pressures, adding the Fed was watching this closely.
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Pierre-Olivier Gourinchas Gourinchas International Monetary Fund Inflation Pressures
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