WASHINGTON — The Federal Reserve is on track for half-point interest rate hikes in June, July and possibly beyond as new labor market data on Friday showed no no signs that the US economy is collapsing under the pressure of high inflation and rising borrowing costs.
A Labor Department report on Friday morning showed that U.S. employers have added an average of 400,000 jobs each month since March, down from the average pace of nearly 600,000 per month from January 2021 to February this year.
It’s a downturn the Fed has reason to welcome, as it tries to tighten monetary policy fast enough to bring inflation down, but not so fast that it triggers something super bad.
Cleveland Fed President Loretta Mester called May’s jobs gains “strong,” but said the slowing trend was “a good thing.”
“We want to see some moderation in both growth activity and the labor market to cool things down a bit,” Mester told CNBC in an interview. change our outlook, or my outlook, on policy: the No. 1 problem in the economy remains very, very high inflation.”
Mester said that unless she sees “irrefutable” evidence of lower inflation – currently hitting 40-year highs and more than triple the Fed’s 2% target – she will support probably another 50 basis point increase in September.
Stocks fell on Friday and traders are betting that the Fed will eventually raise the key rate to a range of 2.75% to 3% by the end of the year.
President Joe Biden said the data showed the economy was holding up even as the labor market transitioned to a more sustainable pace of job growth.