Market wisdom at a glance * SignalTube

So much of the rationale for cutting interest rates even as inflation moves away from the 2% target seems to be that there are mounting downside risks to the labor market. But if those don't materialize and the labor market either stabilizes around current employment levels or even starts to strengthen somewhat, how would that change your perception of how much interest rates need to fall from here? Would you then be a bit more concerned about underlying inflation and the possibility of second round effects?

Colby Smith

Jerome Powell

If you were to see data that suggested the labor market strengthening or even stabilizing, that would certainly play into our decisions going forward. We get data on initial claims, job openings, surveys, the Beige Book, and those show continued gradual cooling but nothing more than that, which gives comfort.

If this shutdown lasts longer and you don't have that data, how does that hinder the committee's ability to assess the labor market and make the right policy decisions? How much is that factoring into the December debate?

Colby Smith

Jerome Powell

We get some data in labor, inflation, and economic activity, and the Beige Book. We might lack detailed feel, but if there were significant changes, we'd still pick that up. Regarding December, it's hard to say with high uncertainty; that could argue in favor of caution about moving.