NEW YORK, May 8 Strong U.S. hiring data in April dealt prospective Federal Reserve Chair Kevin Warsh’s hopes of cutting interest rates a setback on Friday, giving officials greater latitude to use monetary policy to tackle increasingly high inflation.
The U.S. economy added 115,000 jobs in April, exceeding analysts’ forecasts, following an upwardly revised job gain of 185,000 in March
The April job gain was well above the pace of job creation many analysts say is needed to keep the job market steady. The unemployment rate held steady at 4.3%. The hiring indicates the U.S. job market continues to do well at a time when inflation pressures are mounting on the back of the ongoing impact of President Donald Trump’s import tax hike coupled with surging energy prices caused by the Iran war.
The data diminished what were already low odds that the Fed can cut interest rates later this year and strengthened the hand of the substantial number of Fed officials who are worried about inflation and want to hold rates steady for an extended period. “The labor market is not booming, but it is proving harder to break than many feared,” said Olu Sonola, head of U.S. economics at Fitch Ratings. “If unemployment stays this stable, the Fed’s attention shifts back to inflation,” Sonola said, adding that if price pressures remain robust “the Fed’s easing bias is unlikely to survive much longer”. Futures markets currently put negligible odds on a Fed rate cut this year and foresee the current federal funds rate range prevailing through the rest of the year. Following the release of the jobs data, analysts at research firm LH Meyer said they’d take out of their forecast for a Fed rate cut in 2026, while noting they also don’t see a case for raising rates either.