Copy of 965604-01-02-1675781878394
The world's biggest economy added 517,000 jobs in January after five months of slowing, as the jobless rate edged down to 3.4%, the Labor Department said in a report. Image Credit: AFP

Washington: Federal Reserve Bank of Minneapolis President Neel Kashkari said January’s strong labor-market report shows the US central bank needs to keep raising interest rates.

“Right now I’m still at around 5.4 per cent,” Kashkari told CNBC in an interview Tuesday, referring to his forecast for how high rates need to go to bridle inflation. “If I had to pick a number today, I’d be where I was in December.”

The FOMC raised its benchmark rate by a quarter percentage point to a range of 4.5 per cent to 4.75 per cent last week. The smaller move followed a half-point increase in December and four jumbo-sized 75 basis-point hikes prior to that.

Officials in December projected they would raise rates to 5.1 per cent in 2023, according to their median projection, and stay on hold through the year.

Kashkari, a voter this year on the policy-setting Federal Open Market Committee, has emerged in recent months as one of the more hawkish officials at the central bank as it fights high inflation.

Jobs data

Employers added 517,000 new jobs last month while the unemployment rate fell to 3.4 per cent, the lowest since May 1969.

“I too was surprised by the big jobs number. It tells me that so far we’re not seeing much of an imprint of our tightening to date on the labor market,” Kashkari said. “There’s some evidence it’s having some effect but it’s pretty muted so far. I haven’t seen anything yet to lower my rate path.”

Atalanta Fed President Raphael Bostic, speaking in an interview with Bloomberg News on Monday, said that the strong payroll report could suggest the need for rates to peak at higher levels and policymakers would be studying the data to see if the January numbers were an anomaly.

Investors have lifted where they see rates peaking this year and are now in line with that projection following a much stronger-than-expected January employment report.

Chair Jerome Powell, speaking to reporters on February 1 after the conclusion of the Fed’s meeting, said officials expect to deliver a “couple” more interest-rate increases before putting their aggressive tightening campaign on hold.

He has a chance to reinforce his message in the aftermath of the red-hot jobs print when he speaks again at 12:40 pm on Tuesday in Washington.