By Nick Timiraos 

Federal Reserve officials will feel comfortable maintaining their wait-and-see posture on interest rates after Friday's report showing robust hiring in November.

Even before the Labor Department's report Friday, Fed officials were prepared to hold rates steady at their two-day meeting next week after having lowered their short-term benchmark rate by a quarter percentage point at their previous three meetings, most recently in October to a range between 1.5% and 1.75%.

The question now is how long the Fed stays there. Officials have indicated concern that the economy could slow more than they expect, making it possible that they would need to cut interest rates again next year. They have said the outlook would have to deteriorate for them to make such a move.

Manufacturing activity has been contracting in recent months, and business investment tumbled in the second and third quarters, raising fears on Wall Street of a recession if that slowdown spills into the broader economy. A sharp slowdown in hiring is one way that weakness could chill the consumer-driven economy.

Friday's employment report should put those fears to rest for now. Employers added 266,000 jobs in November, bringing the three-month average to 205,000 the highest since January and up from 135,000 in July.

Meantime, hourly wages of private-sector employees rose 3.1% from a year earlier, in line with recent readings but down slightly from a high of 3.4% in February.

Fed officials turned from raising rates last year to cutting them this year after a slowdown in global growth aggravated by the U.S.-China trade war sent manufacturing and investment sliding. Also, unexpected weakening in inflation pressures suggested the economy wasn't as strong last year as they had anticipated.

Until this year, a hiring report showing this kind of strength would have raised questions about the Fed needing to raise rates. That isn't happening right now because Fed Chairman Jerome Powell has signaled a much stronger desire on the part of his colleagues to see inflation rise to and hold at or even above the Fed's 2% inflation target.

Except for last year, inflation has mostly held below the 2% target, raising worries that the public could come to expect lower inflation. Fed officials believe those expectations play a critical role determining actual price movements.

"We would need to see a really significant move-up in inflation that's persistent before we would consider raising rates," Mr. Powell said at a press conference in October.

While several Fed officials have said they didn't think the Fed needed to cut rates this year, none of those officials have indicated a desire to reverse those cuts by raising rates.

The bottom line: The Fed's choice right now is between holding rates steady and lowering them. As long as incoming economic data is anywhere near as bright as Friday's employment report, the Fed will have an easier time staying on hold.

Write to Nick Timiraos at nick.timiraos@wsj.com

(END) Dow Jones Newswires

December 06, 2019 09:58 ET (14:58 GMT)