Federal Reserve Bank of Chicago President Austan Goolsbee said on Wednesday that he becomes more worried about the labor market than inflation, citing recent progress on price pressures and weak jobs data, per Bloomberg
Key quotes
It's important that we not assume that if the labor market were to deteriorate past normal, that we could react and fix that, once it's already broken.
Inflation, it’s clear, has been coming down for some time, and we’re quite restrictive.
Economic conditions will warrant the size of rate cuts
Market reaction
The US Dollar Index (DXY) is trading 0.01% higher on the day at 102.60, as of writing.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD now looks at the 0.6800 barrier
Further losses in the Greenback lent extra legs to the already strong rally in the Aussie Dollar, lifting AUD/USD to fresh multi-week highs around 0.6760 ahead of key flash PMIs due on Thursday.
EUR/USD extends its gains above 1.1170, Dollar melts
While the Greenback acccelerates its decline, EUR/USD manages to climb further and hit new 2024 peaks in the 1.1170-1.1175 band on the back of investors' stronger conviction that the Fed might start cutting rates at its September meeting.
Gold stabilizes above $2,500
Gold retreats from the all-time-high it set above $2,530 and tests $2,500 in the American session on Wednesday. Ahead of the FOMC Minutes, the benchmark 10-year US Treasury bond yield holds steady near 3.8%, making it hard for XAU/USD to preserve its bullish momentum.
Bitcoin and crypto markets rally after FOMC meeting Minutes release
Bitcoin and several other cryptocurrencies rallied briefly on Wednesday after the Federal Open Market Committee released minutes from its July meeting. Bitcoin jumped over 3% just shy of $62K. Ethereum also rose by over 2% following the report.
NFP revisions serve as another wake-up call for the Fed
Stocks stayed firmly in the green as the Fed minutes all but locked in a September rate cut, especially with recent inflation data paving the way. But the surprise cameo from the NFP revision stole the show, sending bond yields on a downward spiral and delivering a body blow to the US Dollar.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.