Mark Zandi: Fed independence is critical for markets and the economy

Summary

Mark Zandi analyzes the jobs report, highlighting soft underlying job growth, weak wage growth, and the outlook for inflation and Fed policy. He expects the Fed to hold rates steady and emphasizes the importance of Fed independence in anchoring inflation expectations.

• Underlying job growth is soft at around 50k per month, abstracting from one-off factors.
• Wage growth is decelerating and currently well below inflation.
• Inflation is expected to migrate down toward softer wage growth over time.
• The Fed is likely to keep interest rates unchanged for the foreseeable future.
• New Fed Chair's tough anti-inflation rhetoric is working, as breakevens have fallen.
• Fed independence is critical for well-functioning markets and the economy.