El-Erian Warns Fed After Jobs Data: 'Inflation Is Not Dead'

Yields on the policy-sensitive two-year Treasury surged after the release, trading more than 18 basis points higher at 3.89%.

“For markets, this is pushing back on overly aggressive expectations of rate cuts by the Fed,” said El-Erian, who’s also a Bloomberg Opinion columnist. “This will get the market closer to what’s likely.”

Fed official Austan Goolsbee had a different take after the data. He said the jobs readout supported a case for lower rates in the months ahead while acknowledging that the central bank’s focus should remain on longer-term trends in inflation and the labor market.

“That we got a superb number, I’m extremely happy with, but let’s not lose sight of what’s the longer thread,” Goolsbee, president of the Federal Reserve Bank of Chicago, told Bloomberg Television.

“A large majority of the committee feels that conditions are going to improve on inflation, that we’re going to keep getting closer to the 2% target, that the unemployment rate is going to stabilize at full employment, and that rates are going to come down a lot over the next year, 12 to 18 months,” Goolsbee said.

(Credit: Bloomberg)