US jobs market stays strong, Fed unlikely to cut rates in 2023, says Standard Chartered

Despite the ongoing challenges posed by the global pandemic, the US jobs market has exhibited remarkable resilience. The job growth in the United States has remained strong, demonstrating the underlying robustness of the economy. This resilience can be attributed to various factors, including the fiscal stimulus measures implemented to support businesses and individuals during the crisis.

In an interview with CNBC-TV18, Abhilash Narayan, Senior Investment Strategist-Group Wealth Management at Standard Chartered Bank shared insights on the US jobs market and the potential actions of the US Federal Reserve (Fed) regarding interest rates. While the US jobs market continues to exhibit strength, the Fed faces constraints in making significant rate hikes due to its limited room for manoeuvre.

He said, “Our base case is that the US will see a recession. So, we are assigning around a 70 percent probability of recession, but we have pushed back the date towards 2024 because the US economic data has been quite resilient. We will get the non-farm payroll data later this week, but by and large, the job market remains quite strong.”

While talking about the potential actions of the US Federal Reserve, Narayan expressed his view that a rate cut in 2023 is unlikely. However, he suggested that there may be room for a rate cut in the first quarter of the calendar year 2024 (Q1CY24).

“It's unlikely that the Fed will cut rates this year. But going into Q12024, we think that the Fed will have to start cutting rates as the economic slowdown will intensify,” said Narayan.

He also pointed out that the US Federal Reserve is currently constrained in its ability to implement significant rate hikes. This limitation arises from the central bank's careful consideration of various factors, including inflation, economic growth, and global market conditions. With inflationary pressures on the rise, the Fed must strike a delicate balance between supporting economic recovery and ensuring price stability. Consequently, the scope for large rate hikes is limited, requiring the Fed to adopt a cautious approach.

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