Federal Reserve headquarters
Steep interest rate cuts may be made by the US Federal Reserve later this year thanks to the weakness in the labor market, which may not be strong as some recent data showed, Wales Fargo macro strategic Eric Nelson told Bloomberg TV this week.
Nelson expected to cut US interest rates by 100 to 125 basis points during the next nine months, adding that the cuts will be larger-than-expected as the economic weakness persists.
“We need a catalyst, we need some data that shows that this recent strong data was just a blip, I think we'll get that,” he said.
That negative catalyst could come as soon as the next few weeks and it may be evident in the job market, Nelson added.
Recent data indicated that the US labor market is still strong, as the economy added 353,000 jobs in January and the unemployment rate reached 3.7%.
Nelson explained that much of this strength may be only seasonal, and will not be reflected in the following job reports.
"I wouldn't say we are necessarily in a recessionary labor market by any means, but to think that we are adding 350,000 jobs a month, I don't really see any other data in the labor market that confirms that kind of trend,” he added.
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