The Federal Reserve is now projected to raise interest rates by 25 bps this month, following the better than expected jobs report. After August’s jobs report nearly triples expectations, analysts are still worried about the next inflation report set to come next week.
The Bureau of Labor Statistics reported Friday that U.S. employers added 162,000 jobs last month, well above the 53,000 that economists were anticipating. According to Fed Governor Michael Barr, he and the Fed would back a rate hike unless inflation shows convincing signs of easing soon. The current federal funds rate target range set by the Federal Reserve is 3.50% to 3.75%, while benchmark 30-year fixed mortgage rates average approximately 6.66% to 6.68%.
Last week, Fed Chair Kevin Warsh told the Federal Reserve’s Jackson Hole symposium that policymakers would “have work to do” if they lacked confidence inflation was returning to the central bank’s 2% target, his clearest signal yet that further rate hikes may be needed. Amid fresh worries over the US-Iran war, yields jumped again Tuesday, with the benchmark 10-year note hitting its highest level since January 2025.
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Furthermore, US President Donald Trump is again threatening the Fed to cut interest rates after the jobs report, contrary to what they are projected to do. The President called on the Federal Reserve to lower interest rates Friday, threatening to cut off trade with several countries if the central bank doesn’t budge. Trump touted the “great” jobs numbers Friday before quickly turning his attention to the Fed, which he has long pushed to slash rates. “Lower the interest rates because the U.S.A. is a much stronger credit than it was just a short time ago!” he wrote in a post on Truth Social. “A STRONG COUNTRY MEANS A LOWER INTEREST RATE – IT’S A BETTER CREDIT.”
“Without the United States agreeing to allow them their big surpluses, and we could stop that immediately, they would no longer be considered financially ELITE!” he added. “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT.”
This is something Trump did often while the Fed was under former chair Jerome Powell. However, Kevin Warsh is backed by Trump, and that could change the way the Fed maneuvers their upcoming meeting with this new ask by the President. The upcoming inflation report will be the ultimate decider for which way the Fed moves regarding changing interest rates.