If the Federal Reserve still has any reasons to cut interest rates in the near future, they’re getting harder and harder to find.
Friday’s jobs report for April provided the latest evidence that the central bank’s larger concern isn’t a flagging labor market but rather a cost of living that is getting increasingly harder for ordinary Americans to bear
The nonfarm payrolls increase of 115,000 last month is hardly gangbusters, but is another sign that the jobs picture has stabilized at least enough to reduce the pressure for rate cuts. By comparison, there is scant evidence to say the same for inflation, likely pushing the rate-setting Federal Open Market Committee into a more hawkish posture where officials are comfortable staying where they are for a prolonged period. “The Fed will shift its focus to containing upside inflation risks now that the labor market appears back on track,” said Lindsay Rosner, head of multi-sector fixed income at Goldman Sachs Asset Management. “The FOMC could well feel compelled to remove the easing bias from its next post-meeting statement in June, which would suggest the hawks are gaining the upper hand on the committee for the time being.” In Fed terms, that means that a swell of cautious sentiment from multiple regional presidents could take further hold. At last week’s FOMC meeting, three of those presidents voted against the post-meeting statement.
The group did not object to the committee’s decision to hold rates steady but rather to “forward guidance” language widely interpreted as signaling the next move would more likely be a cut. Facing inflation “I have never been that big of a fan of trying to use words to jawbone policy decisions,” Austan Goolsbee, president of the Chicago Fed, said Friday in a CNBC interview. Moreover, he said he also is concerned about current inflation trends. “We’ve been above the 2% fed target for five years now.