Investing.com – All signs appear to be heading in one direction, but the US Federal Reserve appears to be adamant that it doesn’t see that path, or that it is being deliberately ignored. Inflation is rising, the labor market is improving, positive signs of an economic recovery are coming from there and there.
Does the Fed take the decision to speed up the date for moving interest rates, or does it not care and continue to administer it in the same way and in the same way? The number of Americans applying for new unemployment benefits fell last week to the lowest level in about 15 months, while consumer prices increased again in May, as domestic demand continued to strengthen as the pandemic eased its grip on the economy.
The US Labor Department said on Thursday that total government jobless claims filed for the first time reached a seasonally adjusted 376,000 for the week ending June 5, compared with 385,000 in the previous week.
That was the lowest level since mid-March 2020, when the first wave of COVID-19 infections swept the country, shutting down non-essential businesses.
Thus, orders fell for the sixth week in a row, and layoffs are receding as employers seek employment, with millions of Americans staying at home due to the difficulty of securing care for their children, generous unemployment benefits and fear of the virus, despite the availability of vaccines on a large scale.
The US Department of Labor said that its consumer price index rose 0.6% last month, compared to its rise to 0.8% in April, the largest increase since June 2009. While expectations were that the consumer price index would rise by 0.4%.
And Janet Yellen had called for the importance of approving Biden’s stimulus plan worth 4 billion dollars, even if it called for more inflation. The US Treasury Secretary said that President Biden’s $4 trillion spending plan would be good for the economy, even if it helped raise inflation and generate higher interest rates that would be implemented.
The US Treasury Secretary added: “We fought inflation when it was very low, and interest rates were at their lowest levels in decades.”
“We would like them to go up, get back to normal interest rates, maybe that will ease some of the conditions, which is not a bad thing,” Yellen said.
In early June, Randall Quarles, Vice Chairman of the Federal Reserve, said that the rise in inflation is temporary, even though it rose to 3.1% in April, a number well above his target of 2%. “A high monthly inflation reading does not necessarily lead to permanently high inflation,” Quarles said.
After similar spikes in the aftermath of the 2007-2009 recession, Quarles added, “We spent a decade below the Fed’s target, we’ve seen this before and supply chains loosen at different speeds, as Parts of the economy are starting to move at a mixed pace, we will see inflationary pressures and one would expect it to be temporary.”
US consumer prices accelerated in the year to April, as a measure of inflation exceeded the Federal Reserve’s 2% target.
Federal Reserve Chairman James Bullard said his “judgment” on the economy is changing, with more evidence from the real economy (not the supposed view). He thinks the job market is better than it looks, despite objections from Jerome Powell and other Federal Reserve board members, who say the ultimate goal of full employment is still a long way off.
Pollard suggests that members and policy makers look at metrics that reflect this reality, such as the unemployment rate to available jobs.
Labor market numbers for May show an increase in non-farm payrolls of 559K, higher than the revised figure in April of 278K.
But the number was weaker than expectations, which indicated to reach 670 thousand. Some took this as a positive sign that the Fed is not under pressure to tighten monetary policy, but this may reduce the repercussions of inflationary pressure.
Gold trimmed most of its morning losses during those moments, which reached early today more than 16 dollars, while it is now declining by 0.2% or 4 dollars at levels of 1891 dollars. On the other hand, it ceded its meager gains that it recorded earlier, to trade on fluctuation tilted to the downside at 90.1 levels.
US stocks opened higher on Thursday, ignoring a higher-than-expected jump in consumer prices in May that raised fears of an early Federal Reserve monetary policy tightening, while another report showed that the labor market remains under pressure.
The industrial index rose 55.37 points, or 0.16%, to 34502.51 points, the Standard & Poor’s 500 index opened, up 9.01 points, or 0.21%, to 4228.56 points, and the Nasdaq Composite Index rose 22.13 points, or 0.16%, to 13,933.88 points.
The price of gold rose, trying to get back to the level of $1,900 an ounce.
Despite the availability of factors that may push the Fed to start thinking about tightening monetary policy, the Fed will not be able to confront the bulls who have rebounded for many months thanks to the generous monetary stimulus, and therefore expectations suggest the stability of monetary policy until the emergence of a balanced recovery of the labor market, and the return of economic activity in full, according to announced plan.