The Federal Reserve will face more urgency in its fight to cool down the US economy with steep interest rate increases after the latest batch of labour market data showed an unexpected acceleration in jobs gains and strong wage growth. The figures released on Friday eased concerns that the American economy was sharply slowing down or already in recession after two consecutive quarters of contraction in output this year. However, it will increase worries that high inflation may become entrenched as wages keep rising, requiring even more intervention by the central bank.

The Fed has already moved its main interest rate up from the rock-bottom levels of the coronavirus pandemic to a target range of 2.25 per cent to 2.5 per cent this year, including two consecutive 0.75 percentage point increases in June and July.

On the back of the latest jobs report, economists and Fed watchers say the likelihood of another aggressive upward move next month has risen, although the central bank will still be examining upcoming economic data closely, including inflation figures due next week.