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Kudlow: Jobs report shows country is in a ‘very strong prosperity cycle,’ but Fed should still cut

Larry Kudlow, Director of the United States National Economic Council.

Adam Jeffery | CNBC

Larry Kudlow, director of the National Economic Council, is “very optimistic” about the health of the U.S. economy but believes the Federal Reserve should “take back the interest rate hike” it made in December because of low inflation.

“We are still in a very strong prosperity cycle…We have very good pro-growth policies, low taxes, deregulation, opening energy, trade reform. I think the incentives of our supply side policies are working,” Kudlow said on Bloomberg Television on Friday after the release of the June jobs report.

Payroll growth rebounded sharply in June as the U.S. economy added 224,000 jobs versus 165,000 expected, according to the Labor Department. Wage growth fell short of expectations however and the unemployment rate ticked higher.

While seeing a strong economy, Kudlow still thinks the Fed should ease monetary policy, and the reason for that is the “rock-bottom” inflation rate.

Inflation is “way below the Fed’s target and what most people want and that’s the reason they should take back the interest rate hike,” Kudlow said. “With a weak global economy taking out an insurance policy is not a bad thing…I just don’t want anything to interfere with this strong prosperity cycle.”

After a blowout jobs report, traders are still pricing in an easing of monetary policy next month, betting on a 94% of a quarter point cut. The Fed will announce its policy decision at the conclusion of July 30-31 meeting.

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