A look at US job growth, Fed’s toolbox

Will higher growth, inflation alter rates and can Fed fix a slowdown?

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

Will Job Growth, Low Inflation Change Rates?

  • US labor market remains healthy, unemployment at multi-year low.
  • Short-term rates anchored by fed funds target range at 1.5% to 1.75%.
  • Inflation remains subdued, ranging between 1.5% to 2.0%.
  • Could a pick-up in growth, inflation alter interest rates?
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Does Fed Have the Tools to Fix a Slowdown?

  • Fed can cut rates, start quantitative easing to avert a slowdown.
  • But rates are already low and there’s little evidence of QE’s success.
  • QE tends to disrupt price discovery process, reduce risk in markets.
  • Could Fed easing monetary policy further be a policy misstep?
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