"Fed Whisperer": Nonfarm Payrolls Mean the Fed's Focus Will Shift from Employment to Inflation

Nick Timiraos, the "Fed Whisperer" from Odaily, stated that four months ago, a major question facing the Federal Reserve was whether it needed to continue cutting interest rates to support a seemingly fragile labor market. That question no longer exists. The labor market has stabilized, and due to tariffs and the war in Iran, inflation is now shifting from its previous decline to a renewed rise.

The April nonfarm payrolls report highlighted this shift in outlook and means that as the market assesses the next steps for the Fed, which is currently firmly on hold, attention will clearly pivot to inflation data.

April saw steady hiring activity, an unchanged unemployment rate, and still-robust income growth—none of which are sufficient reasons to cut rates. With the labor market giving the Fed room to wait, the next step in policy discussions will be when and how to shift towards "neutral"—where the chances of a rate hike and a rate cut become roughly equal. The answer may depend almost entirely on future inflation data. (Jin Shi)