President Trump once again suggested the Federal Reserve should lower rates, but any slim chance of a June cut evaporated Friday with a jobs report that showed continued resilience in the labor market.
There were questions about the possibility of a June cut this week following a weak ADP National Employment Report released Wednesday, Wellington Management fixed income portfolio manager Brij Khurana said, but the new Labor Department report released Friday “is good enough that it takes away June.”
“The labor market is not cracking yet even though it is decelerating,” he added.
What the Labor Department said on Friday is that the US economy added 139,000 nonfarm payrolls in May, more than the 126,000 expected by economists. The unemployment rate held steady at 4.2%.
Following the release, Trump posted on social media that “AMERICA IS HOT” and said, in a reference to Fed Chair Jerome Powell, that “‘Too Late’ at the Fed is a disaster!”
He also suggested more cuts were now necessary, referring to moves made by other central banks to ease monetary policy.
“Europe has had 10 rate cuts, we have had none. Despite him, our Country is doing great. Go for a full point, Rocket Fuel!” That followed a similar post from the president on Wednesday where he called Powell “unbelievable!!!” and said, “‘Too Late’ Powell must now LOWER THE RATE.”
Read more: How much control does the president have over the Fed and interest rates?
But Friday’s Labor Department report makes it even less likely the Fed will consider rate cuts in the near term, Fed watchers said, since it doesn’t show that the jobs market is grinding to a halt.
Investors are currently betting that there is virtually no chance of a cutout of the June 17-18 meeting and that the central bank won’t ease its policy again until September at the earliest.
The Fed has not altered its benchmark rates at all in 2025 after reducing them by a full percentage point at the end of 2024, citing uncertainties about Trump’s policies.
In fact, in recent days, several fed policymakers have made it clear they are more worried about inflation than employment and thus are content to be patient about any changes to the Fed’s current stance.
“I see greater upside risks to inflation at this juncture and potential downside risks to employment and output growth down the road, and this leads me to continue to support maintaining the FOMC’s policy rate at its current setting if upside risks to inflation remain,” Federal Reserve governor Adriana Kugler said Thursday in a speech at the Economic Club of New York.
Read more: How jobs, inflation, and the Fed are all related
Kansas City Fed president Jeff Schmid also said Thursday he is very focused on the risk for higher inflation from tariffs and that the Fed should “not let down our guard.”
“While the tariffs are likely to push up prices, the extent of the increase is not certain, and likely will not be fully apparent for some time,” Schmid added.
Schmid noted that “the extent of the drag on growth and employment is also unclear,” but “I intend to remain focused on the importance of maintaining credibility on inflation.”
But there is certainly a divide emerging among some Fed policymakers about whether to hold rates steady or get more comfortable about cuts later this year.
Some policymakers are arguing for “looking through” the impact of the duties as temporary, a stance that would leave the door open for cuts.
Federal Reserve governor Chris Waller is now firmly in the first camp. Last Sunday, he made an argument for why any impact on inflation from tariffs likely won’t last.
“Given my belief that any tariff-induced inflation will not be persistent and that inflation expectations are anchored, I support looking through any tariff effects on near-term inflation when setting the policy rate,” Waller said in a speech in Seoul, South Korea.
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