June Jobs Report: US Hiring Expected to Remain Robust: Live Updates
Federal Reserve policymakers are debating how much further to raise interest rates to ensure inflation quickly returns to a normal pace, and that calculation will likely depend heavily on the strength of the labor market.
Officials will keep a close eye on Friday’s employment report, the latest job growth reading they will receive before their July 25-26 meeting, for a hint at how much momentum remains in the US economy.
Fed officials are surprised by the continued strength of the economy after 16 months of trying to slow it down by raising interest rates, making borrowing more expensive. Although growth is slowing down, the housing market is starting to stabilize and the labor market has remained abnormally strong opportunities enough and solid wage growth. Fed officials worry that if wage growth remains unusually fast, it could become difficult to fully bring high inflation back to their target of 2 percent.
That resilience — and the stubbornness of rapid inflation, particularly for services — is why policymakers expect to keep raising interest rates, which they have already lifted above 5 percent for the first time in about 15 years. Officials have raised rates in smaller increments this year than last year, skipping a rate change for the first time in 11 meetings at their meeting in June. But several policymakers have made it clear that even if the pace slows, they still expect interest rates to rise further.
“It may make sense to skip a meeting and go more gradually,” said Lorie K. Logan, the president of the Federal Reserve Bank of Dallas. during a speech this week, noting that it is important that officials follow up now by continuing to raise rates.
She added that “inflation and the labor market moving more or less as expected will not really change the outlook.”
Fed officials predicted in June that they would raise rates twice more this year – assuming they changed in quarter-point increments – and that the labor market would weaken, but only slightly. They saw the unemployment rate is rising from 3.7 percent now to 4.1 percent.
Investors widely expect Fed officials to raise interest rates at their July meeting, and labor market strength afterward could help shape the outlook. While policymakers won’t release new economic projections until September, Wall Street will be monitoring how policymakers respond to economic developments to gauge whether another move is likely this year.