Every month, the Federal Reserve monitors the prices of goods we buy, known as the Consumer Price Index (CPI). The June report showed that prices fell for the first time since March 2020. This excited many people, as they believed the Federal Reserve might lower interest rates. Lowering interest rates can make borrowing money cheaper, and help businesses grow. This good news made various markets, including the digital money market called cryptocurrency, very happy for a short while.

Fed to Prioritize Job Market

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• Experts predict the Federal Reserve may prioritize addressing the struggling job market over inflation concerns when considering rate cuts.
• Despite June’s lower-than-expected Consumer Price Index (CPI), traders remain strongly convinced of a rate cut in September.
• A consistent rise in US unemployment and signs of a weakening labor market could lead the Federal Reserve to introduce monetary easing measures earlier than expected.

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However, the Federal Reserve also examines another important indicator: the Producer Price Index (PPI), which measures the cost of making goods. Friday’s PPI data was higher than expected, but traders, the people who buy and sell things like stocks, still believe that the Fed will lower interest rates in September.

The Federal Reserve has two big jobs. One is to keep prices stable, not too high or too low. The other is to help as many people as possible have jobs. But, if fewer people are working, the Federal Reserve might need to take action. This could mean lowering interest rates sooner, even before prices stabilize at the level they aim for, which is 2%.

Recently, more people in the U.S. are looking for jobs. The unemployment rate has been going up for the last three months. It reached 4.1% in June, higher than 3.8% in March.

John Leer, an intelligent guy from Morning Consult, is worried about the future of the job market. He said that even though things seem to be cooling down a bit now, the job market is still quite strong compared to the past.

The head of the Federal Reserve, Jerome Powell, also talked about the job market slowing down. He said it’s no longer causing prices to go up too much. Another intelligent guy, Olu Sonola from Fitch Ratings, thinks the Federal Reserve might lower interest rates sooner to balance unemployment and prices.

But Markus Thielen from 10x Research warned that if the Federal Reserve lowers interest rates, it might not be good for traders. He said that people might start to move their money away from risky investments like cryptocurrencies and into safer options.

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