The Fed Is Running Out of Reasons to Cut Rates

CNBC reported Friday that the Federal Reserve is running low on justifications for lowering borrowing costs, with the latest employment data removing yet another argument for near-term Fed rate cuts.

April Payrolls Steady But Not Spectacular

The US economy added 115,000 nonfarm payroll jobs in April. That figure is far from explosive. But it signals enough labor market stability to ease pressure on the Fed to act. The more pressing concern for policymakers is not unemployment. It is a cost of living that keeps rising despite five years of above-target inflation.

The consumer price index for March came in at 3.3%, well above the Fed’s 2% goal. Analysts now warn the rate-setting Federal Open Market Committee may tilt more hawkish heading into its June meeting.

Hawks Gaining Ground Inside the FOMC

Lindsay Rosner, head of multisector fixed income at Goldman Sachs Asset Management, told CNBC the committee could strip its so-called easing bias from the June post-meeting statement. That shift would signal hawks are increasingly driving committee sentiment.

That dynamic was already visible last week. Three regional Fed presidents dissented from the post-meeting statement language. They did not oppose the decision to hold rates steady. Their objection was to forward guidance they felt implied the next move would be a cut.

Five Years Above Target and Still Rising

Chicago Fed President Austan Goolsbee, who spoke to CNBC on Friday, said he has never been a strong advocate for using language to steer policy expectations. More pointedly, he flagged the direction of inflation as alarming. The Fed has now spent five years above its target, progress stalled last year, and the last three months have seen the rate move higher rather than lower. Goolsbee added that services costs — not just gasoline or tariffs — are increasingly driving price pressures.

Scott Clemons, chief investment strategist at Brown Brothers Harriman, was direct in his assessment. Nothing in the current economic data compels the Fed to lower rates further, he said. The central bank can hold as long as it chooses.

Markets Price Out Cuts Entirely

Fed funds futures traders have essentially erased any probability of a cut through April 2031. The rate curve now implies a meaningfully higher chance of hikes in the years ahead. Dan North, senior economist for North America at Allianz, said the recent data makes the case to hold — and eventually lean toward tightening — easier to make with each passing week.

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