The Federal Reserve is bending to the desire of financial markets as Chairman Jerome Powell hints that there may be a reduction in interest rates next month.
The economy has been moving pretty well the past few months -- until Friday, August 1st, when we got a look at the non-farm payrolls for July.
"They came in below estimates," financial expert Pat Shinn says, "but also showing a huge revision of the prior two months by a whopping 258,000 jobs.
"The end result -- there really were no net jobs added over the past three months."
Shinn, who appears daily with financial market updates as the KTRH Money Man on Newsradio 740 Houston, says this changes the picture for the American economy, allowing the Federal Reserve to drop interest rates a little as markets have wanted for some time.
Fed Chairman Powell implied last Friday that a rate cut could happen in September to bolster markets somewhat, but all he really did was acknowledge the will of the markets.
"If Powell had pushed back instead of seeing the market go up, you would have seen the market drop dramatically," Shinn says.
"Now, if inflation moves up because of tariffs, the Federal Reserve will have to make a very tough choice -- do they lower rates to support the labor market or do they keep things as they are to put off inflation?
"Now the down side of that is, in light of all that, it's very likely that long-term interest rates will move higher, which affects home loans.
"The people at Goldman Sachs now believe although businesses have been absorbing most of the costs of tariffs, they believe that's going to flip-flop and by October two-thirds of the costs of tariffs are going to be absorbed by consumers.
"If that's the case, you're going to see that in the form of inflation.," Shinn adds.
All the more reason why the Fed is walking a tightrope as its Open Market Committee makes its decisions about interest rates.