Minutes of June meeting: Fed's concerns about future economic situation prompt weakening of interest rate cut expectations

The minutes of the Federal Reserve’s June meeting revealed the central bank’s concerns about the future economic situation, which has led to a weakening of market expectations for interest rate cuts. The minutes captured Fed officials' concerns about slowing economic growth, below-target inflation and global economic uncertainty. Those concerns suggest the Fed may delay cutting interest rates, contrary to earlier market expectations. For more details on the Fed's latest assessment of the economic outlook and its impact on markets, continue reading below.

The Fed’s confidence in cutting interest rates has not yet been fully established, and economists warn that if the layoff rate worsens in the future, it will affect the labor market. The minutes highlighted the Beveridge Curve and labor market dynamics. But UBS pointed out that this view ignores what may happen when the job vacancy rate reaches 6.0%, and the contraction of the labor market may lead to large-scale layoffs.
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At the latest Fed meeting, Federal Reserve Chairman Powell said that although he is satisfied with the current level of interest rates, his confidence has not yet been fully established. He also warned of the impact this could have on the labor market if layoffs worsened in the future.
According to economic analyst Robert Shiller, the United States may face an unemployment rate as high as 9.2% by 2023. That's because more and more people are losing their jobs as technology companies lay off workers. In addition, he also believes that even if the employment rate remains stable, employees may be required to undergo "retraining" to adapt to new job requirements.
In this regard, an economist named Brian Robinson gave a different view. He believes that according to the Fisher Trap theory, when the job vacancy rate reaches 6.0%, large-scale layoffs may occur. This means that if 60,000 jobs are eliminated in six months, the entire labor market will face serious pressure.
However, UBS chief economist Alexander Justin believes that this view ignores what may happen when the job vacancy rate reaches 6.0%. "While we refer to the possibility of job losses as a 'potential shock,' that does not mean that all jobs will be lost," he said. He also cautioned investors that the data can be misleading because of economic downturns. Unemployment rates may decrease during periods of economic expansion, while unemployment rates may increase during economic expansions.
Overall, the views of Powell and Robinson contrast sharply. Powell said that while he was satisfied with the current level of interest rates, he still needed to strengthen his resolve on monetary policy. Robinson offered a more pessimistic view, saying the labor market could face significant challenges if layoffs worsen in the future.
No matter what the outcome is, we must admit that the importance of the labor market is self-evident. As leaders of a business, we need to ensure that our employees have jobs that are right for them and are treated fairly and equitably. At the same time, we also need to provide help and support to those who are struggling to find work.
Overall, this Fed meeting provided us with important information on how to respond to changes in the labor market. In future work, we need to pay more attention to these factors and adopt corresponding strategies to protect our interests and competitiveness.

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