By Nick Timiraos
Reacceleration in hiring this spring will provide more grist to Federal Reserve officials who are concerned about inflation and fear interest rates are too low to restrain new price pressures.
Some of those officials have suggested in recent days the Fed should be prepared to raise rates later this year, taking back at least some of the three quarter-point rate cuts officials made in the second half of last year. Those reductions were aimed at stabilizing a labor market that looks much healthier today than it did then.
The report won't neatly resolve a debate over how far the Fed should lean toward entertaining rate increases later this year, but it does underscore how the case for cutting rates anytime soon has been buried.
Officials who are skeptical about rate increases will point to signs that the labor market isn't an obvious source of price pressures. A decline in the unemployment rate, which held steady at 4.3% in May, would undercut that argument.
The stronger case for rate hikes right now comes from the inflation outlook. Overlapping shocks-from the AI build-out, tariffs, and energy-threaten to keep prices running well above the Fed's 2% target, even if there's progress to reopen the Strait of Hormuz to commercial shipping. If the Fed stands still when inflation is rising, inflation-adjusted, or "real," interest rates fall. That dynamic could animate deliberations over hikes even if the labor market doesn't.
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(END) Dow Jones Newswires
June 05, 2026 09:06 ET (13:06 GMT)
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