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Unemployment expectations

On January 6th, the US unemployment rate for December 2022 will be published. It si one of the most important indicator the #federalreserve follows and it’s part of its dual mandate. It is also the main reason why fed officials continue to feel comfortable hiking rates higher, because it hasn’t shown signs of stress. But as you can see in the chart below, their own projections are lifting unemployment rate to 4.5% for 2023, which is still low and manageable. What seems strange though is they expect it to be basically constant for 3 years while they are fighting inflation, hiking rates and reducing the Fed’s balance sheet. As we enter the new year and the hawkish measures the fed has taken sink in, we’ll see if this assumption is reasonable and if the market agrees.

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