The Fed: Sizzling jobs report justifies Powell’s Fed press conference reluctance to suggest rate cuts

The strong April job report justified Fed Chairman Jerome Powell’s press conference where he bucked calls from financial market participants to suggest a willingness to cut interest rates. Read More...

Federal Reserve Board Chairman Jerome Powell speaks during a news conference earlier this week.

The strong April jobs report justified Fed Chairman Jerome Powell’s press conference where he bucked calls from financial market participants to suggest a willingness to cut interest rates later in the year.

Powell stressed that Fed officials believed recent low core inflation readings were caused by transitory factors that won’t last. This was taken as a signal the central bank was not prepared to cut interest rates anytime soon.

Read: Fed holds interest rates steady as economy grows at ‘solid rate’ and inflation stays low

While some analysts were upset that Powell was not more worried about the health of the economy reflected in weak prices, the strong payroll gain shows “he was right,” said Diane Swonk, chief economist at Grant Thornton.

“For the Fed, it’s steady as she goes,” Swonk added.

The U.S. economy created 263,000 jobs in April, above the 217,000 according to economists surveyed by MarketWatch. Yearly increase in wages were flat at 3.2%.

Read: Unemployment rate falls to 49-year low of 3.6%

After their two-day meeting this week, Fed officials once again said they would be “patient” about future interest rate moves, awaiting clear signs about the health of the economy and the puzzling behavior of inflation, which remains subdued despite the tight labor market.

“The Fed is going to feel comfortable” after the job report, said Rob Martin, economist at UBS.

The bottom line is that the Fed will see the economy is a “little stronger” than it looked earlier in the year, Martin added.

“If Powell had the report before his press conference, he wouldn’t have had to change any words,” Martin said.

At some point later this year, the Fed will have to have a discussion about removing the “patient’ forward guidance, Martin said.

“But there is no reason for a super rush,” he said.

At their meeting the Fed said they saw a pickup in activity, diminished risks and low inflation as transitory. “It is all consistent here,” Martin said.

The yield on the 2-year Treasury TMUBMUSD02Y, +0.01% fell slightly to 2.33% after the jobs report. U.S. stocks DJIA, +0.75% finished up almost 200 points after the job report.