Eyes on Jobs Report after Fed DownshiftEyesonJobsReportafterFedDownshift

The Federal Reserve raised its benchmark interest rate by 25 basis points on Wednesday, slowing its pace of policy tightening for a second consecutive meeting as officials gauge the impact of last year’s outsized rate hikes. Easing supply-chain bottlenecks and softer demand for goods have helped bring inflation down from four-decade highs. Meanwhile, low unemployment and higher wages hold the potential to stoke price pressures, encouraging the central bank to keep rates higher for longer. The Labor Department will release its January jobs report on Friday, and economists anticipate that hiring decelerated with a slight increase in the unemployment rate. However, in a sign of the labor market’s resilience, data published on Wednesday showed there were 11 million job openings at the end of December, an unexpected increase from 10.4 million a month earlier.

Risk assets have rallied this year with the S&P 500 posting its strongest January performance in four years, reflecting optimism that inflation will continue to cool and central banks will soon end efforts to tighten policy. In a new post on The Bond Blog, PGIM Fixed Income examines the difference of opinion between the Fed and market participants about the pace and extent of disinflation this year, as markets continue to bet on a rate-hike pause in March.