Strong non-farm payrolls report solidifies rate hike expectations, Fed Chairman Powell's policy debut faces a test

The U.S. labor market is regaining its footing, and the strong employment data released on Friday has intensified concerns in the market about inflation heating up again, as well as strengthening the arguments of some Federal Reserve officials that there may be a need to raise interest rates later this year. The ever-changing outlook poses a challenge for newly appointed Federal Reserve Chairman Kevin Wash, who needs to convince the market that the central bank has the ability to control inflation while resisting pressure from the White House to lower borrowing costs. Fed watchers say that when Wash chairs his first monetary policy meeting on June 16-17, the easy part will be removing any hints of rate cuts in the post-meeting statement. The challenge lies in explaining how he intends to curb inflation. "Kevin Wash must show a very tough stance on the issue of inflation," said Heather Long, Chief Economist at Navy Federal Credit Union. "Otherwise, he will lose the trust of the bond market."