Labor market tightness, marked by 1.9 job openings for every unemployed person in January, together with stubbornly high inflation argue for the Federal Reserve to continue raising interest rates next week. But the recent collapse of two regional banks has sparked fears of contagion in the banking sector, bruising the stock market and casting a pall over the economy's outlook. Financial markets have wavered between the Fed hiking rates by a quarter-point and pausing its monetary policy tightening campaign when policymakers meet next Tuesday and Wednesday, according to CME Group's FedWatch tool. As recently as last week, they were betting on a 50 basis points rate hike. Those expectations were dialed back to a quarter point after the government reported the economy added 311,000 jobs in February, but with wage gains slowing and the unemployment rate rising to 3.6% from 3.4% in January. The U.S. central bank has raised its benchmark overnight interest rate by 450 basis points since last March from near-zero to the current 4.50%-4.75% range.
The claims report also showed the number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 29,000 to 1.684 million during the week ending March 4. The so-called continuing claims remain low, suggesting some laid off workers could be easily finding new work. (Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)
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