The Federal Reserve and Chairman Kevin Warsh are expected to tighten monetary policy in the months ahead to combat inflation, even if the labor market shows more weakness.

The government reported Friday that the economy lost 23,000 jobs in July, a major surprise to the downside. Typically, declining payrolls would suggest the Fed is likely to ease monetary policy by cutting rates to spur more economic activity. But inflation is high enough that the central bank is instead likely to implement at least one rate hike before the end of the year. That is true even if the next jobs report, scheduled for the Friday before Labor Day, shows further deterioration. The next Fed monetary policy meeting is scheduled for Sept. 15 to 16.

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