2 min readStrong jobs report delays Fed cuts as tariff risk looms
The latest US employment data has contributed to delaying expectations for Federal Reserve rate cuts, despite mounting political pressure. A stronger-than-expected June jobs report suggests the Fed may be less likely to ease monetary policy before its September meeting despite political pressure to do so, as inflation risks tied to looming tariffs complicate the economic outlook.
Nonfarm payrolls rose by 147k in June, significantly above the 106k consensus forecast. While headline figures were robust, the underlying details paint a less encouraging picture. Private-sector hiring came in at just 74k, well below the anticipated 100k, while the public sector added 73k jobs, driven by state and local government hiring. Remarkably, these three sectors, government, leisure & hospitality, and education/healthcare, have accounted for 87% of all job growth over the past two-and-a-half years, while important economic engines such as manufacturing, trade and business services contributed very little. These softening labour metrics suggest that while the economy remains resilient, it is not overheating, a key concern for the Fed amid sticky inflation.
President Trump has ramped up pressure on the Fed, calling for immediate rate cuts of 200–300 basis points. Two of his appointees, Chris Waller and Michelle Bowman, have publicly supported the idea of a rate cut as early as this month. However, the broader Federal Open Market Committee remains cautious. Given today’s data and the inflationary impact of tariffs set to kick in over the coming weeks, a July rate cut now looks unlikely, this has been reflected in the futures market where we saw sharp downgrades to 3 interest rate cut scenarios.
Adding to the inflationary threat, President Trump announced his administration would begin sending formal notices to US trading partners outlining new unilateral tariffs. These will take effect August 1 and are expected to range from 10–20% in most cases, but could rise as high as 60–70% for some countries. Trump said all letters would be distributed by July 9, raising concerns about retaliatory measures and further inflationary pressure as global supply chains adjust.
On the digital asset front, there were signs earlier in the week of a potential shift in investor sentiment: the first meaningful daily outflow in a month occurred, totalling US$148m, but this has since corrected with US$1bn of inflows this week so far. Bitcoin and Ethereum accounted for US$775m and US$225m of those flows, respectively, while Solana saw US$21m in inflows following the recent US ETF launch. Ethereum investment products have now reportedly surpassed US$3bn year-to-date, while global ETP inflows stand at a US$19bn high for the year.
In summary, economic data continues to provide mixed signals, but for now, strong employment figures and inflation risks are likely to keep the Fed on hold, despite political pressure and evolving market expectations, while digital assets have shown resilience despite ongoing inflation concerns.
