A rebounding stock market isn't an all-clear signal for the economy. Stocks edged up Tuesday after a second report in less than a week showed inflation slowing. But that doesn’t mean the nation will dodge a recession next year, economists say.
“The fact that we got a good month isn’t enough to stop them from the path they’re on,” says Bob Schwartz, senior economist for Oxford Economics.
“They’re still more concerned about prematurely stopping the rate increases than going too far,” Schwartz says, echoing Fed Chair Jerome Powell’s remarks early this month.At a UBS conference Sunday, Fed Governor Christopher Waller said the market overreacted to the encouraging inflation numbers, noting the Fed still has “a ways to go” before it can halt its rate hikes.
“The labor market is too strong and will need to slow before they will pause,” Millar says. Employers added 261,000 jobs in October, well above the 190,000 economists expected, according to the Labor Department. "I think it will probably be appropriate soon to move to a slower pace of increases, but I think what’s really important to emphasize is... we have additional work to do," Brainard said Monday, according to Reuters.While the Fed needs to see the labor market and inflation ease further before it pulls back, “there is compelling evidence that the inflation peak is behind us, and the retreat should continue,” Schwartz wrote in a note to clients.
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