Fed's Policy Focus Shifts to Inflation Amid Labor Market Stability

Nick Timiraos, known as the "Fed's mouthpiece," noted that four months ago, the Federal Reserve faced a significant question: whether to continue cutting interest rates to support a seemingly fragile labor market. According to Jin10, this issue is no longer relevant. The labor market has stabilized, and inflation, influenced by tariffs and the Iran conflict, is shifting from previous declines to rising again. The April non-farm payroll report highlights this change in outlook, indicating that the market's focus will now clearly turn to inflation data when assessing the Fed's next policy direction, which currently remains firmly on hold. April's hiring activity remained robust, the unemployment rate was unchanged, and income growth continued to be strong, none of which justify a rate cut. With the labor market providing the Fed with room to wait, the next step in policy discussions will be when and how to shift to "neutral"—where the likelihood of rate hikes and cuts becomes roughly equal, with the answer likely depending almost entirely on future inflation data.