U.S. Federal Reserve Chair Jerome Powell indicates potential interest rate reduction

The labor market in the United States has shown a curious stability, with both supply and demand of workers falling, according to recent reports. This development comes amidst a series of economic shifts, such as more restrictive immigration policies that have caused an abrupt slowdown in the growth of the long-term labor force.

The shift in the labor market followed Jerome Powell's announcement about potential interest rate decreases. The Fed president has emphasized that monetary policy does not follow a predetermined course, and any changes will be data-dependent.

The proposed interest rate decrease by Powell has had a noticeable impact on the stock market. The S&P 500 has risen by 1.40%, reaching 6,459 units, while the Dow Jones Industrial Average has risen by 1.60%, totaling 715 points, to 45,500 whole. Among the top 30 companies listed on the Dow Jones, Nike, Home Depot, Caterpillar, Boeing, and American Express had notable gains. However, JPMorgan and Coca-Cola were the only decliners among the top 30 companies.

The Nasdaq has also seen an increase, rising by 1.64%, to 21,447 points. The Fed's interest rates are currently 100 basis points closer to neutrality than they were a year ago, indicating a more accommodative stance from the central bank.

The risks to employment are currently tilted downwards, but the risks to inflation, according to Powell, are "tilted to the upside". This suggests a possible trade-off between maintaining low unemployment rates and managing inflation.

Significantly higher tariffs between trading partners are transforming the global trading system, with potential implications for economic growth and productivity. Changes in fiscal policies, spending, and regulatory policies could also have significant effects on the economy.

The offensive against Lisa Cook, an American economist and the first Black woman appointed as a member of the Federal Reserve's Board of Governors in 2022, adds to the pressure the Trump administration is exerting on the Fed. Trump has stated that he will investigate Cook for potential mortgage fraud, but a U.S. president can only remove a member of the Federal Reserve's Board of Governors for misconduct or criminal behavior.

The potential decrease in interest rates by the central bank, if implemented, would be the first such decrease since Donald Trump returned to the White House. The implications of this move on the economy and the stock market remain to be seen.