The Zhitong Finance App learned that the number of jobless claims in the US fell to its lowest level since 1969 at the beginning of last week, indicating that in an overall stable labor market environment, the scale of corporate layoffs is still low. According to data released by the US Department of Labor on Thursday, the number of jobless claims in the US at the beginning of the week ending July 18 was 187,000, lower than market expectations of 212,000 and the previous value of 208,000; the number of jobless claims for the week ending July 11 was 1.796 million, lower than market expectations of 1.807 million and the previous value of 185,000; the four-week average of jobless claims at the beginning of the week ending July 18 was 207,500, lower than the previous value of 214,300.
The low number of initial jobless claims shows that employers are still reluctant to make large-scale layoffs. However, the employment report released last month shows that many Americans have withdrawn from the labor market, which may also be one of the reasons for the decline in unemployment claims.
After rising at the end of May and the beginning of June, initial jobless claims declined somewhat. Most economists consider the previous rise to be noise. Although the growth of non-farm payrolls slowed sharply in June and the non-farm payrolls data for April and May were revised down, economists said that the labor market has not undergone substantial changes and is still in a state of “slow recruitment and slow dismissal.”
The situation in the US labor market, which is still relatively stable, may provide support for the Fed to remain on hold, but at the same time, concerns about inflation caused by the escalation of the situation in the Middle East may prompt the Federal Reserve to maintain a hawkish stance for a longer period of time.
As the Federal Reserve's July interest rate meeting approaches, uncertainty about the Fed's policy path has clearly increased under the leadership of the new Chairman Walsh. There are only a few days left until the meeting, and the market still has major differences over whether the Federal Reserve will raise interest rates this month. This situation is rare in recent years. According to the interest rate swap market, traders currently expect the probability that the Federal Reserve will announce an interest rate hike of 25 basis points on July 29 is about 30%, and the probability of keeping interest rates unchanged is about 70%.
Since becoming the chairman of the Federal Reserve in May of this year, Walsh has stated many times that he hopes to abolish the Federal Reserve's long-standing practice of hinting at interest rate paths in advance through forward-looking guidelines. He believes that in the context of rapid changes in the economic environment, early release of policy signals may limit the flexibility of decision makers.
For financial markets, this means that the risks and benefits of betting on the direction of the Federal Reserve's policy have increased. Investors who make correct judgments can expect higher returns, while those who make mistakes will also face greater losses. However, Walsh has always stressed that US inflation has always been higher than the Fed's 2% target since the COVID-19 pandemic, so the market generally expects that the Fed will continue to raise interest rates during the year. Currently, the biggest doubt is only when to act.
Compared to traders, economists are more consistent in their judgment. According to the survey, all 76 economists surveyed expect that the Federal Reserve will keep the federal funds rate target range unchanged at 3.5% to 3.75% during the July 28-29 meeting.
In fact, data released last week showed that the US consumer price index (CPI) fell for the first time in six years in June, which once prompted the bond market to bet that the Federal Reserve would stay on hold. However, with the recent escalation of the US-Iran conflict again, international oil prices have risen again. Crude oil prices surged sharply on Friday after Iran-backed Houthis said they attacked two Saudi oil tankers in the Red Sea. Simultaneous pressure on the Strait of Hormuz and Mander threatens deeper supply disruptions, reduced superposition inventory buffers, and increased refining pressure, which will further increase inflationary pressure and drive expectations of interest rate hikes.
Against the backdrop of the turbulent situation in the Middle East, several Federal Reserve officials expressed stronger concerns about rising prices last week. In 2026, FOMC voting committee and Dallas Federal Reserve Chairman Lori Logan became the first US Federal Reserve official to call for interest rate hikes, saying that inflation does not seem to continue to return to the Fed's 2% target level. Kansas City Federal Reserve Chairman Jeff Schmid also said that since the risk of inflation is likely to increase further in the next few months, inflation is his biggest concern right now. Although the US inflation data for June was better than market expectations, Schmid warned that it was too early to determine that inflation would start a downward trend. Federal Reserve Vice Chairman Philip Jefferson also said that if inflation does not cool down quickly, the Federal Reserve should consider raising interest rates, but at the same time, he said that the current monetary policy situation is good.