On My Mind: For a few rate cuts more

The latest US employment report indicates a robust labor market, with nonfarm payrolls surpassing expectations and the unemployment rate dropping to 4.1%. This strength in employment, coupled with wage growth outpacing the Fed's inflation target, suggests limited scope for further monetary easing.

Despite the Fed's recent 50 basis-point rate cut, the author argues that only a 25 basis-point reduction was necessary, and anticipates the Fed might hold rates steady in upcoming meetings. The author challenges the notion of a "transitory" inflation spike, attributing enduring inflationary pressures to loose fiscal policies and high demand.

The end of the zero interest rate era post-GFC marks a shift back to pre-crisis norms, with the neutral rate likely above 4%. The author predicts a short and shallow rate-cutting cycle, given the current policy setting isn't overly restrictive.

Financial markets, however, may continue to expect more significant easing, potentially leading to market volatility if the author's forecast holds true.