The latest employment numbers came in better than expected, with experts saying the Federal Reserve will stay the course and continue to hike interest rates aggressively to tame inflation.
The economy beat expectations and added 390,000 jobs last month. Additionally, the country’s unemployment rate remained at 3.6%, an ultra-low level that is just about where it was at right before the pandemic started to wreak havoc on the economy more than two years ago.
May was the first month that has reflected both rate hikes the central bank has conducted, and the fact that payrolls came in higher than was forecast gives the Fed ammo to keep pushing rates ever higher, especially after several previous months of positive job gains.
“The strong May figures will only encourage the Federal Reserve to stick to its course of more aggressive monetary tightening, as inflation remains near a 40-year high,” said Andrew Viteritti, the Economist Intelligence Unit’s commerce and regulation lead.
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The last time inflation was this high, Ronald Reagan was president. Consumer prices increased 8.3% in the 12 months ending in April, a slight downward tick from the explosive 8.5% registered the month before but still far beyond the Fed’s 2% target.
The Fed hiked its interest rate target by a quarter of a percentage point in March, the first time it did so in years. It later jacked up rates by half a percentage point last month, a move that is akin to two simultaneous rate hikes and an aggressive tack taken for the first time in more than two decades.
The Fed’s rate-hiking cycle is not likely to abate in the near term given the country’s towering inflation. The markets are pricing in half-point hikes in June and July, essentially akin to four rate hikes in two months
“In essence, one could look at this as permission for the Fed to continue its move towards increasing interest rates. That to me is the big headline,” Brian Marks, executive director of the University of New Haven’s entrepreneurship and innovation program, told the Washington Examiner on Friday.
Some economists are concerned that by hiking interest rates, the Fed will cause the economy to crater …….