The persistent reluctance of the Federal Reserve to lower interest rates has culminated in dire employment figures today. The Bureau of Labor Statistics (BLS) appears to have acted in a manner that inadvertently favored the Fed’s decision to maintain interest rates, even if slightly detrimental to Trump’s administration. However, the significant revisions witnessed recently highlight how previously overlooked issues have evolved into notable challenges.
US Data and Trump’s Concerns
Amidst these developments, US Secretary of Labor Chavez noted the necessity for modernization in the BLS’s data collection methods. Major revisions bolster the claim that skepticism towards BLS data is warranted, an assertion that Trump echoed last month with his opinion that the BLS management needed a change.
The latest substantial revisions have exposed allegations that the institution might have knowingly or unknowingly concealed weaknesses in employment data. At last month’s Jackson Hole meeting, Powell, aware of the unfavorable data, mentioned the possibility of prioritizing employment.
Consequently, the markets have been increasingly expecting interest rate cuts. Following further disappointing employment data and today’s revisions, these expectations have escalated further. If inflation rates do not exceed 0.3% monthly, a substantial rate cut of 75 basis points could occur before the year’s end.
For the September 17 meeting, there is now an 8% expectation for a 50 basis point cut and a 92.1% expectation for a 25 basis point cut. The likelihood of a cumulative 75 basis point cut by year-end is nearly 75%.
Trump’s Statements
Following the arrival of the new data, Donald Trump made further public statements. Scheduled events include a press conference by Leavitt and the start of the Apple event at 8:00 PM. At 11:00 PM, Trump is expected to make new announcements and subsequently sign a declaration. In his comments following the BLS data, Trump shared remarks questioning the Fed’s system being flawed.
“If the Fed had followed the data we published, they would have raised rates at the beginning of 2021. The entire organization is flawed and needs fixing. They should utilize modern information sources,” Jay Hatfield from Infrastructure Capital Advisors commented.
“President Powell was late to raise rates. There’s no doubt rates need cutting. He’s dragging his feet. The Fed will cut rates by 50, 75, maybe even 100 points,” said Greg Faranello from American Securities.
