Fed Running Out of Reasons to Cut Rates

CNBC reported Friday that the Federal Reserve is rapidly exhausting any justification for cutting interest rates, with April’s employment figures removing what little urgency remained for policy easing.

Jobs Data Steadies but Inflation Stays Hot

April’s nonfarm payrolls came in at 115,000. That figure is modest but signals the labor market has found its footing. It is not the kind of deterioration that typically forces central bankers to act. Inflation, by contrast, is moving in the wrong direction. The Consumer Price Index for March printed at 3.3%, still well above the Fed’s 2% target. That gap has now persisted for five straight years.

Goldman Sachs Asset Management’s head of multisector fixed income, Lindsay Rosner, told CNBC the FOMC will likely pivot its attention toward containing inflation now that employment looks more durable. She added that policymakers could strip easing language from their June statement entirely, handing a visible win to the committee’s hawkish wing.

Dissent Inside the FOMC

Last week’s policy meeting already showed cracks. Three regional Fed presidents voted against the post-meeting statement. Their objection was not to the decision to hold rates steady. It was to forward-guidance language that markets read as tilting toward an eventual cut.

Chicago Fed President Austan Goolsbee told CNBC on Friday he has reservations about deploying words to steer market expectations. More pointedly, he flagged that inflation progress has stalled and then reversed over the past three months. He also warned that price pressures are no longer confined to fuel and tariff-sensitive goods. Services costs are rising too, complicating any path toward easing.

Background: Five Years Above Target

The Fed has struggled to return inflation to its 2% benchmark since price pressures first surged in 2021. Rate hikes began aggressively in 2022, then paused, and modest cuts followed in late 2024. But progress stalled through 2025, and the committee has held its benchmark rate steady for several consecutive meetings.

Markets Price In Hikes, Not Cuts

Traders in fed funds futures have now removed any meaningful probability of a cut through at least April 2031. The rate curve implies a growing likelihood of hikes over the coming years. Scott Clemons, chief investment strategist at Brown Brothers Harriman, told CNBC the data gives the Fed unlimited patience. Senior Allianz economist Dan North went further, suggesting the next directional bias shift could lean toward tightening rather than easing.

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