Hot U.S. jobs data pushes Fed rate cuts further away

A strongerthanexpected U.S. jobs report for May has reduced expectations for nearterm Federal Reserve rate cuts and increased speculation that borrowing costs may stay elevated for longer. The report showed nonfarm payrolls rose by 172,000, with prior months also revised higher. Market pricing shifted after the release, with traders lowering the odds of a cut at the Fed’s June 1617 meeting and assigning a higher chance of a rate hike by the end of 2026. The data adds pressure on new Fed Chair Kevin Warsh as he faces internal disagreements over inflation, productivity, and the way policymakers should read recent price data. Several Fed officials have publicly raised concerns about inflation remaining too high, while also questioning some of Warsh’s policy assumptions. The article notes that Wall Street and Fed officials are also debating how much weight to give measures such as trimmed mean inflation, forward guidance, and the central bank’s balance sheet plans as the Fed prepares for its next meeting.