Fed May Consider Rate Cuts Following Decline in Job Openings

Traders are anticipating a quarter-point reduction in short-term borrowing costs at the Federal Reserve's upcoming meeting, based on expectations set on Tuesday. This forecast aligns with a recent report from the U.S. Department of Labor indicating that job openings have fallen to their lowest levels since January 2021.

Despite the employment increase in September exceeding expectations, analysts interpret the Labor Department's findings as a sign that the Fed is likely to pursue interest rate cuts at its remaining two meetings in 2024. ZipRecruiter Chief Economist Julie Pollak emphasizes that the Fed should remain cautious despite the positive employment data and avoid deviating from its anticipated rate-cutting trajectory. Pollak stated, "Overall, the report will warn the Fed not to overreact to the recently positive employment data when it meets next week and to stay on the path of rate cuts."

Fed policymakers previously expressed that there is no need for further slowing of the labor market to continue progress in lowering inflation. Current data does not indicate a sudden or urgent decline in the labor market. Although the labor market has significantly cooled compared to the beginning of the year, the ratio of job openings to the number of job seekers has remained relatively stable since August.

In addition to labor market data, a report from the Conference Board shows that consumer confidence increased in October, with more consumers reporting that jobs are plentiful.

The next two-day meeting of Fed policymakers is scheduled for one week after the U.S. elections, which will determine the country's political leadership. Last month, the Fed reduced the policy interest rate by half a percentage point to a range of 4.75%-5.00%.