New Delhi

Jerome Powell, US Federal Reserve chair, maintains his hawkish stance on interest rate cuts despite falling inflation. 

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Central bankers still foresee three interest-rate cuts before the end of 2024, but leaders are waiting and watching for more data to confirm inflation continues to slow.

Policymakers Monday stressed that they want to see proof that inflation is definitively on its way back to the Fed's target of 2 per cent before they ease off on borrowing costs.

Here is a look at some of the key economic indicators the Fed is keeping a close eye on.

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Employment

The economy created a healthy 303,000 jobs in February, above expectations.

Payrolls for the prior two months were also revised higher. The jobless rate surprisingly fell to 3.8 per cent, the 26th consecutive month it has been below 4 per cent — the longest streak since the 1960s.

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Meanwhile, inflationary pressures remained muted as wages only rose 3.4 per cent on a year-over-year basis. Richmond Fed President Thomas Barkin said, "The data pointed to a 'quite strong jobs report'.

The Fed appears increasingly confident that further job growth might not prevent inflation from falling lower, especially if labour supply increases and wage growth moderates.

Both these factors occurred in March in the way that the Labour force developed at the fastest pace since August and annual wage growth softened to the lowest since June 2021.

But wage growth remains above the 3.0 per cent-3.5 per cent range that most policymakers believe aligns with the Fed's 2 per cent inflation target.

Available Positions

The JOLTS is closely watched by none other than Federal Reserve Chair Jerome Powell, coming from the United States Department of Labour.

The JOLTS is a measure of the labour supply-demand imbalance that indicates how many openings exist for every unemployed person actively looking for work.

This ratio had been rapidly falling toward pre-pandemic levels; however, since October, it has consistently remained high within the range of 1.35 – 1.43, considered way above pre-pandemic levels of 1.2 to 1.

February's figures were the latest available, and they showed that the ratio had decreased as the number of job seekers climbed, pushing up the jobless rate.

Quits rate, another measure aside from the ones mentioned in JOLTS, has shown some returning to pre-pandemic levels.

Inflation

Fed follows the inflation measures set by the Personal Consumption Expenditures price index and also has a target rate using the same measure.

The PCE index rose at a 2.5 per cent annual rate in February, up from 2.4 per cent in January.

Core inflation, excluding volatile food and energy prices, rose at a 2.8 per cent rate, down slightly from the upwardly revised January figure of 2.9 per cent.

Neither figure inspires strong confidence among Fed policymakers regarding a consistent decline in inflation towards their target.

The Consumer Price Index data was also worrying. The CPI gained 3.2 per cent on year in February, topping forecasts and the 3.1 per cent rise the previous month.

However, core CPI fell only a bit to 3.8 per cent from 3.9 per cent, excluding food and energy costs, a possible indicator that the Fed has a long fight with inflation ahead.

Not having to factor in huge increases for gasoline, which accounted for over half the increase, and housing, which was a big contributor to overall expense increases, ups the CPI.

It remains to be seen if asset-price inflation in housing will do the Fed's bidding—taper down—anytime soon.

(With inputs from Reuters)