Trump will be furious but his man’s hands are tied |
Trump will be furious but his man’s hands are tied
June 8, 2026 — 12:27pm
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When is good news bad news? It’s when a new chair of the Federal Reserve, expected by the president who appointed him to deliver interest rate cuts, is confronted with a sudden surge in employment the week before his first meeting.
On Friday, sharemarkets were sold off heavily after US jobs data for May significantly exceeded expectations, with 172,000 jobs added in the month.
In the United States, the S&P 500 fell 2.64 per cent, the tech-heavy Nasdaq index 4.8 per cent and a group of the biggest tech stocks 3.8 per cent after the data was published. The Philadelphia Semiconductor Index, which had soared about 90 per cent this year, driven by the artificial intelligence boom, plunged more than 10 per cent.
The bond market also reacted to the data, with the yield on two-year Treasury notes jumping from 4.05 to 4.15 per cent and that on 10-year bonds rising from 4.48 to 4.53 per cent.
The apparently perverse market reaction was provoked by a realisation that the unexpectedly strong jobs data meant the interest cut the markets expected Kevin Warsh to deliver before the end of this year is almost certainly off the table, indeed the greater likelihood now is that there will be at least one, if not two, rate hikes later this year.
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The US Federal Reserve Board has a dual mandate: keeping inflation under control while maximising employment.
With jobs not a concern at this point, its full focus will now be on an inflation rate that has been rising, initially because of Donald Trump’s tariffs but, more recently, because of his war on Iran.
At 3.8 per cent, the rate is well above the Fed’s targeted inflation rate of 2 per cent, and inflation data that is due on Wednesday in the US is expected to show it has risen again.
Whatever agenda Warsh may, or may not, have brought to the Fed when he was recently confirmed to succeed Jerome........