A stronger-than-expected jobs report for the month of January is likely to cement that the Federal Reserve holds interest rates steady for a while.
“[The jobs report] pours cold water on the idea the Fed could cut rates again before mid-year and will fuel internal debate as to how restrictive policy is and how much slack there is in the labor market,” Evercore ISI head of economics and central banking Krishna Guha said.
The economy added 130,000 jobs in January — about double the number economists had anticipated — while the unemployment rate inched down to 4.3% and the labor force participation rate edged up.
President Trump called the report “far better than expected” and said the US should be paying much less on its bonds.
“We are again the strongest Country in the World, and should therefore be paying the LOWEST INTEREST RATE, by far. This would be an INTEREST COST SAVINGS OF AT LEAST ONE TRILLION DOLLARS PER YEAR – BALANCED BUDGET, PLUS,” Trump posted on Truth Social.
But with three rate cuts last fall and many Fed officials feeling enough has been done for now to support a job market that looked to be slipping last year, the January report likely reinforces policymakers’ expectations that they’ve done enough for now. In the meantime, concerns about inflation linger.
Read more: How much control does the president have over the Fed and interest rates?
Kansas City Fed president Jeff Schmid said Wednesday that with the cumulative rate cuts since 2024, the central bank’s benchmark policy rate is no longer restraining the economy.
He said with inflation running closer to 3% than 2%, “I see it as appropriate to maintain a somewhat restrictive policy stance … Further rate cuts risk allowing high inflation to persist even longer.”
Cleveland Fed president Beth Hammack, a new voting member of the FOMC, said Tuesday that she believes economic growth will pick up this year thanks to recent rate cuts and fiscal support. She expects businesses will move forward with projects and that a stronger job market will push down the unemployment rate over the course of the year.
Based on her forecast and her view that inflation is still too high, Hammack said the Fed “could be on hold for quite some time.”
Separately, Dallas Fed president Lorie Logan said in a speech Tuesday that she thinks downside risks to the job market have “meaningfully dissipated” and that the three rate cuts the central bank made last year to guard against deterioration in the job market have pushed up risks for inflation. Logan said she expects strong consumer spending and business investment will support the job market going forward.
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