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Jan 5, 2024, 5:27pm EST
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Semafor Signals

What US job numbers and European inflation mean for interest rates

Insights from Yahoo Finance, Reuters, and Süddeutsche Zeitung

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A "now hiring" sign is displayed outside Taylor Party and Equipment Rentals in Somerville, Massachusetts, U.S., September 1, 2022.
REUTERS/Brian Snyder/File Photo
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The News

The U.S. gained 216,000 jobs last month, beating expectations from economists and indicating a resilient labor market that is doing better than forecast. In Europe, inflation across the Eurozone jumped in December, according to figures released Friday.

Both make it unlikely that interest rate cuts are on the immediate horizon in either region, analysts said.

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SIGNALS

Semafor Signals: Global insights on today's biggest stories.

Strong labor market means less need to cut rates

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Sources:  
NFCU, Yahoo Finance

The higher-than-expected U.S. job numbers mean more Americans are working and getting raises – marking a solid “insulation against recession, which is fading further away,” said Robert Frick, a corporate economist with Navy Federal Credit Union. He pointed out that post-pandemic, drops in unemployment have curiously accompanied drops in inflation, though those metrics typically run reverse to each other. The Federal Reserve has previously signaled it is done raising interest rates and could cut rates by March, but the strong jobs numbers indicate a hotter market than expected, likely taking that possibility “off the table,” according to Yahoo Finance’s Jennifer Schonberger.

Europe and Germany see inflation jump

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Sources:  
Reuters, Süddeutsche Zeitung

An increase in inflation in Europe — from 2.4% in November to 2.9% in December — also bolsters the case that the European Central Bank should keep interest rates at record highs, Reuters reported. In Germany specifically, the inflation hike is likely to continue into January, according to Süddeutsche Zeitung, which noted that the risks of cutting rates now are high: It could cause a “dangerous comeback” of high inflation – against a backdrop of geopolitical instability that could lead to price shocks at virtually any time.

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