The Fed Is Running Out of Reasons to Cut Rates

CNBC reported Friday that the case for Fed rate cuts is growing weaker by the week, with the latest labor market data removing one of the last remaining arguments for easing.

April Jobs Report Takes the Pressure Off

April’s nonfarm payrolls came in at 115,000. That figure is modest but sufficient. It signals enough labor market stability to ease the urgency for lower borrowing costs. The bigger concern for policymakers is no longer job losses. It is the rising cost of living squeezing ordinary Americans. With employment holding steady, the Federal Open Market Committee faces little political or economic pressure to act.

Lindsay Rosner, head of multi-sector fixed income at Goldman Sachs Asset Management, told CNBC the Fed will now pivot its attention toward containing inflation upside. She added the FOMC may drop its easing bias altogether at the June meeting, handing hawks greater control of the committee’s direction.

Inflation Has Not Cooperated

The Consumer Price Index for March showed inflation running at 3.3%. That sits well above the Fed’s 2% target. Austan Goolsbee, president of the Chicago Federal Reserve, said Friday on CNBC the central bank has now spent five years above its inflation goal. Progress stalled last year. The past three months have seen the trend reverse upward. Goolsbee warned the pressure is not confined to gasoline or tariffs. Services inflation is becoming a growing concern. He does not vote on the committee this year but gains that right in 2027.

Background: Hawks Were Already Gaining Ground

At last week’s FOMC meeting, three regional Fed presidents voted against the post-meeting statement language. They had no objection to holding rates steady. Their dissent targeted forward-guidance wording that markets read as a signal the next move would be a cut. That friction inside the committee reflects a broader hawkish shift that predates the April data. The Fed has held its benchmark rate steady for several consecutive meetings as tariff-driven price pressures complicate the policy outlook.

Markets Now Price in Hikes, Not Cuts

Fed funds futures pricing has effectively removed all probability of a rate cut through April 2031. The rate curve now implies hikes are the more probable outcome over the next few years. Scott Clemons, chief investment strategist at Brown Brothers Harriman, put it plainly to CNBC. Nothing on the economic front currently demands lower rates. Senior Allianz economist Dan North agreed, saying the data makes holding rates easier and may eventually push the bias toward tightening.

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