The U.S. Bureau of Labor Statistics released the latest non-farm employment data last (7th) night, showing that the number of new non-farm jobs in the U.S. in January was 143,000, lower than the market's previous expectation of 169,000, indicating a slight cooling of the labor market.
However, it is worth noting that the unemployment rate survey results for the month unexpectedly fell to 4%, lower than the market expectation and the previous value of 4.1%; at the same time, the Bureau of Labor Statistics also revised the non-farm employment increase in November 2022 from 212,000 to 261,000, an increase of 49,000; and revised the non-farm employment increase in December 2022 from 256,000 to 307,000, an increase of 51,000 - looking at these data comprehensively, the U.S. labor market is still resilient and has not shown any obvious signs of cooling.
Is there no hope for rate cuts in the first half of the year?
For those who are expecting a rate cut, the labor market conditions reflected in this non-farm data provide the Fed with the basis to need more time for observation.
According to the CME FedWatch tool, the market's expectation that the Fed will keep interest rates unchanged in March has risen from 84% a week ago to the current 91.5%, and the probability of a 25 basis point rate cut is only 8.5%.
Fed officials are divided on "whether to cut rates"
After the data release, Fed official Kashkari said in a speech that if inflation data is good and the labor market remains strong, he would support further rate cuts:
If we see good inflation data and the labor market remains strong, that would lead me to support further rate cuts.
If inflation cools, I don't see why we would want to keep rates unchanged.
However, his remarks are completely different from the recent views of Dallas Federal Reserve Bank President Lorie Logan at a meeting hosted by the BIS in Mexico City, where she stated that with strong demand and a healthy labor market, and inflation gradually approaching the Fed's target, the Fed's benchmark policy rate may be close to neutral. She emphasized that if this trend continues, there is limited room for further rate cuts in the short term:
What if inflation is close to 2% in the next few months? While this is good news, in my view, it may not be enough to prompt the FOMC to cut rates quickly.
It is clear that the opinions within the Fed have not yet reached a consensus.
Further Reading: Fed Official: Employment is Strong, Inflation Near 2% - Interest Rates Are Near Neutral with Limited Room for Short-Term Cuts
Trump threatens to impose tariffs on more countries next week
In addition, it is worth noting that U.S. President Trump said at a joint press conference with visiting Japanese Prime Minister Kishida Fumio last night that he will announce next week actions to impose reciprocal tariffs on multiple countries, hinting that it will be a broad-based action. He said he tends to implement reciprocal taxes, meaning that any country that imposes high tariffs on U.S. imports will also be subject to equivalent tariffs on its exports to the U.S.
I think that's the only fair way to do it. That way nobody gets hurt. They charge us. We charge them...I seem to be more inclined towards that approach rather than a fixed fee or tariff.
As for Japan, Trump said he wants to reduce the U.S. trade deficit with Japan, but believes it can be resolved without taking punitive action, emphasizing that U.S.-Japan relations are very good (according to data from January to October 2022, the U.S. trade deficit with Japan reached $57.1 billion), and he said he will work with Kishida to counter China's economic aggression.
However, there are doubts as to whether Trump will back down, and Kishida refused to respond at the press conference as to whether Japan would retaliate if the U.S. really imposes tariffs.
Bitcoin is on a roller coaster ride
After the non-farm data was released, Bitcoin also responded in sync, with BTC starting a wave of gains around 9:30 PM last night, reaching a high of $100,149; however, under the influence of Trump's potential escalation of the trade war, BTC quickly plummeted, reaching a low of $95,601 around 5 AM this morning.
Shortly before the deadline, it has recovered slightly, currently trading at $96,463, down 1.03% in the last 24 hours.
Further Reading: Fed Mouthpiece: Trump's Tariffs Become a Source of Inflationary Pressure, Powell May Pause Rate Cuts
