FOMO: Fed's Fear of Snagnation

 

Fed's fear meter may be pointing to stagnation, rather than stagflation  

 

By Howard Schneider

September 12, 20253:14 AM PDTUpdated 2 hours ago

Item 1 of 2 A 'Help Wanted' sign hangs in restaurant window in Medford, Massachusetts, U.S., January 25, 2023. REUTERS/Brian Snyder/File Photo

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Summary

US central bank expected to cut rates next week
Fed officials more comfortable that tariffs will only temporarily boost inflation
Worries rising about weaker job growth, higher unemployment

 

WASHINGTON, Sept 12 (Reuters) - Federal Reserve officials, already expected to cut interest rates next week, may also be closer to settling a months-long debate over the risks of stagflation after recent data showed longstanding weakness in hiring and easing inflation concerns.

 

The shift in tone began this summer, led by dissents in July from two Fed governors who wanted to cut rates at that time based on risks to the job market, and continuing as other officials began downplaying inflation and focusing more on an economy that was slowing and at risk of shedding jobs.