The Federal Reserve is increasingly worried about the fragility of the U.S. labor market, signaling a potential shift in the focus of monetary policy as risks to employment begin to rival lingering inflation concerns.
A Vulnerable Labor Market
“The minutes suggest that the FOMC is somewhat more sensitive to labor market vulnerabilities than to inflation risk,” noted prominent economist Mohamed El-Erian following the release of the minutes from the March 17-18 meeting.
While the central bank voted almost unanimously to maintain the benchmark interest rate at 3.5 to 3.75%, officials explicitly noted that “job gains had remained low” and the unemployment rate was little changed.
Many meeting participants warned that the labor market “appeared vulnerable to adverse shocks” given the current low-hiring environment.
They explicitly cautioned that a further drop in labor demand could push the unemployment rate sharply higher, highlighting the deep structural concerns among central bankers.
Full story available on Benzinga.com
This post was originally published here
