Strong Jobs Report Increases Fed Rate Hike Probability in 2026 Amid Inflation Concerns, Redfin Says

03:30 PM EDT, 06/05/2026 (MT Newswires) -- A stronger-than-expected jobs report for May has increased the odds of monetary policy tightening by the Federal Reserve later this year as inflation remains elevated, Redfin said Friday.

The US economy added 172,000 nonfarm jobs last month, official data showed Friday, almost double the 88,000 increase expected in a Bloomberg-compiled survey. The unemployment rate was steady at 4.3%, which matched Wall Street's projection.

"This (jobs) report does not look strong enough to push the Fed into hiking right away, especially with wage growth still gradually easing," Redfin said. "But combined with recent inflation data, it makes it easier for the Fed to move further away from an easing bias and toward a more balanced stance where the next move could plausibly be a hike."

Last week, government data showed that the US personal consumption expenditure price index jumped 3.8% year over year in April, the largest print since May 2023, even as consumer spending moderated in the face of high gasoline prices. PCE inflation, which excludes the volatile food and energy components, accelerated to 3.3% last month from 3.2% in March.

Last month, minutes of the central bank's Federal Open Market Committee's April meeting showed that policymakers flagged the possibility of higher interest rates if the Middle East conflict keeps inflation above their 2% goal.

"With this (jobs) data, economists are now gradually moving their forecasts to expect hikes, and futures markets are now pricing in a rate hike by the end of this year and potentially another one next year," Redfin said Friday. "However, it is also worth remembering that payroll growth has had a strong seasonal tendency to decelerate in the summer months over the last few years."

Although the latest jobs data increase the probability of interest rate hikes, "it is too soon to treat this strength as the new normal," the online real estate brokerage said.

Markets widely expect the FOMC to leave interest rates unchanged later this month, which would mark its fourth straight pause, according to the CME FedWatch tool.

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