'They're going to need to hike rates': Wall Street weighs in on Fed's next policy decision after blowout jobs report

Wall Street sees a blowout jobs report and spiking Treasury yields as another sign that the Fed is going to have to hike rates to clamp down on inflation.

The US economy added 162,000 jobs last month, blowing past economists' expectations. If the Fed was looking for clues of a slowing economy, this report wasn't it.

"They're a little bit behind the curve," Joe Brusuelas, RSM chief economist, told Yahoo Finance, in reference to the central bank. "They're going to need to hike rates if they want to reinforce their credibility, and that's going to cause a lot of problems at 1600 Pennsylvania Avenue."

The Trump administration has been pushing hard for lower rates to bring borrowing costs down and flatten the yield curve, with the president threatening a trade embargo if they don't.

Fed Chairman Kevin Warsh has been mum about forward guidance, though his speech in Jackson Hole last month was seen as hawkish.

On the day before the Fed's communication blackout period ahead of its next policy meeting began, Fed Governor Christopher Waller signaled support for keeping rates steady if next week's inflation report shows easing prices.

"I think we are leaning into the direction of a Fed hike," R.J. Gallo, Federated Hermes chief investment officer for global fixed income, told Yahoo Finance.

Gallo believes that if the Fed hikes, the move would appease the short-term bond buyers, while demand for long-term rates could rise as the Fed tackles inflation.