- Initial jobless claims fell while demand in the housing market rose.
- Powell said that he does not see cracks in the US labor market.
- The Swiss National Bank became the first major central bank to ease its monetary policy.
Interest futures ended Thursday mixed as positive data from the US pushed up Treasury yields and weighed on the bond market. Still, prices remained near Wednesday’s highs due to Powell’s reassurance on rate cuts.
US initial jobless claims (Source: Labor Department)
Data on Thursday revealed that the US economy remains robust despite higher interest rates. Initial jobless claims fell while demand in the housing market rose. The labor market has remained strong despite high borrowing costs, allowing the Fed to maintain higher interest rates. Moreover, on Wednesday, Powell said that he does not see cracks in the labor market. The Fed expects this resilience to continue in 2024, with unemployment rising by only 0.1% by the end of the year.
Meanwhile, the housing market is recovering after falling due to higher interest rates. Demand is going up as mortgage rates drop in anticipation of lower interest rates in the US. The report on Thursday showed that existing home sales rose to the highest level since February last year. After these reports, Treasury yields rose while interest futures declined.
Meanwhile, risk sentiment improved after the Swiss National Bank became the first major central bank to ease its monetary policy. This is a sign that inflation in Switzerland is under control. Consequently, investors are more optimistic that inflation will decline in more major economies. The SNB rate cut opens the door to policy easing that will lower global borrowing costs.
Despite the decline in interest futures, prices remained near recent highs hit after the FOMC policy meeting. At the meeting, the Fed held rates but held its forecast for rate cuts in 2024. Notably, Powell dismissed fears of renewed inflation when he said that it was still in a downtrend. Consequently, the Fed will likely go ahead with its plan to cut rates three times this year. This led to an increase in rate-cut bets and a surge in interest futures.
Furthermore, Powell reassured markets that the US economy would remain resilient through the year, reducing recession worries. Notably, the Fed’s economic projection revealed better expectations for growth in 2024. Moreover, the Fed expects inflation to decline, though at a slower pace, to 2.9% by the end of the year.
