adp non-farm report just came out. Much higher non-farm employment than predicted. We are screwed in term of rate cut. High unemployment and high core inflation gave jpowell easy excuse for pause rate and wait and see.
That's called stagflation, and the only way to beat it is typically escalating the rate to being a much higher level, not cutting, to stop the inflation first, which will cut demand, and hopefully cause prices to stabilize if not fall, but it will be a recession at the minimum all the same.
If they cut, and spending starts intensifying, while prices increase arbitrarily because of tariffs alone, then we are going to get into a situation of serious, run away inflation, which will the necessitate a very serious rate increase to stem.
That's why central banks are terrified of stagflation, because once it gets baked in, and it impacts the psychology of the market, it takes a paradigm shift in social mentality to change the perceptions of the economy enough to get out of stagflation.
The economy is as much science/mathematics as it is human psychology.
But for rn, they can not cut rates, or they risk serious inflation due to tariff price hikes alone. If anything, I am betting with high probability of a hike before the year is up as the tariffs filter throughout the economy and cause the price levels to rise. Without corresponding wage increases, moreover, people are going to struggle with their consumption, much less basic necessities.
However, since this is a tax, and not additional profit for these firms, there is no leftover money to give increases to employees without cutting into their bottom lines. We are about to witness a very 'fun' cycle of people working themselves to death for minimal return in order to just barely make it, while companies face decreasing sales domestically and internationally due to less money in people's pockets domestically and unwillingness to buy American/retaliatory tariffs shifting foreign demand away from US goods that are easily replaced.
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u/CoughRock 23h ago
adp non-farm report just came out. Much higher non-farm employment than predicted. We are screwed in term of rate cut. High unemployment and high core inflation gave jpowell easy excuse for pause rate and wait and see.
it's going to take a miracle to see rate cut now.