White House top economist doesn't expect more rate hikes this year after September jobs miss

Chris Phelan, chair of the President's Council of Economic Advisers, doesn't expect the Federal Reserve to raise interest rates again following Friday's employment report and this week's cooler inflation data.

Phelan pointed to a subdued reading on the job market from September, coupled with comments this week from two Fed officials that tamped down expectations for an October rate hike .

"I think with today's job market data, and a speech by the [Fed] vice chairman, I think the market is now no longer expecting another rate hike," Phelan told Yahoo Finance in an interview Friday.

The economy added 29,000 jobs in September, falling short of expectations of 88,000, and down from a revised 133,000 for August. Monthly job growth has averaged 65,000 so far this year. According to Phelan's calculations, the economy needs to add only about 40,000 jobs per month to keep the unemployment rate at its current level.

Phelan argued that the central bank's decision to raise rates last month was a "mistake" because inflation is already coming down.

"I said right before they raised rates that it would be a mistake to raise rates. I said right after they raised rates that it was a mistake to raise rates," Phelan said. "My view was simply keep your eye on the ball — which Chairman Warsh in his Jackson Hole speech said, 'What is the ball?' The ball is inflation."

Phelan pointed to the Fed's preferred measure of inflation, the Personal Consumption Expenditures (PCE) index, which cooled to 3.4% in August , down from 3.7% from the previous two months. Excluding volatile energy and food prices, "core" PCE rose 3%, marking a drop from 3.3% in July.

Phelan noted that looking at a three-month annualized average of core PCE, the measure stands at 2%.

"So we are already making progress on inflation," he said. "It's coming down before they took any action."

While some Fed officials continue to make a case for additional tightening , Fed Vice Chair Philip Jefferson and New York Fed president John Williams struck a more dovish note. Both noted that inflation remains too high but that the central bank should take time to monitor and assess whether inflation will decline in a timely manner.

Williams said that, after raising rates in September, he sees "no need for urgency" and that "we have time to gather more information."

Another metric closely watched by both the White House and Fed officials: the unemployment rate. Friday's jobs report showed the unemployment rate edged up to 4.2% in September from 4.1% a month earlier.