Svmuu reported that “Fed Whisperer” Nick Timiraos said four months ago, a major issue facing the Federal Reserve was whether it needed to continue cutting interest rates to support the seemingly faltering labor market. That issue no longer exists today. The labor market has stabilized, and due to tariffs and the impact of the Iran conflict, inflation is shifting from its previous decline to a renewed uptick.
The April nonfarm payrolls report highlights this shift in outlook and signals that, as the market judges the next policy direction of the Fed, which is currently firmly on hold, the focus will clearly turn to inflation data.
April hiring activity remained steady, the unemployment rate was unchanged, and income growth remained robust—none of which provide a reason to cut rates. With the labor market giving the Fed room to continue waiting, the next step in policy discussions will be when and how to move toward "neutral"—where the likelihood of a rate hike and a rate cut becomes roughly equal. The answer may depend almost entirely on future inflation data. (Jinshi)