The Fed: ‘Wow,” Fed’s Daly says after killer jobs report, but it doesn’t alter Fed’s inflation-fighting plan

Yet she also said it’s premature to draw conclusions. The Fed needs to see more data on the economy, she reiterated, before determining its next step.

The economy created some 517,000 new jobs in January, the government said Friday, an increase in nonfarms payrolls that was three times the gain that Wall Street had forecast.

Commentary by Rex Nutting: The blowout jobs report is actually three times stronger than it appears

The stunningly strong report renewed talk that the Fed might raise its policy interest rate several more times as part of its fight to slay inflation. A tight labor market has driven up wages over the past two years at the fastest pace in four decades.

The jobs report did show further moderation in wage gains — something the Fed wants to see. The increase in hourly pay over the past year slowed to 4.4% in January from 4.8% in the prior month and a recent peak of 5.9%.

“My outlook for inflation is for it to come down,” Daly said. “Right now I see some positive signs, but it’s far too early to declare victory.”

The Fed on Wednesday raised its benchmark interest rate, the latest in a string of hikes, in an effort to slow economic growth just enough to temper inflation without plunging the economy into recession.

Fed officials have made it clear, though, that they will do what it takes to get inflation back down to pre-pandemic levels of 2% or so. The yearly rate of inflation stood at 6.5% in December, based on the consumer price index.

Higher interest rates tend to slow the economy by raising the cost of borrowing for credit cards, mortgages, car loans and other consumer and business loans.

Daly is not a voting member this year on the Fed’s panel that raises and lower interest rates.