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(Reuters) -The Federal Reserve's latest Monetary Policy Report to Congress, released on Friday, was upbeat about the state of the economy but warned about some concerning aspects of the financial system. The report, which comes ahead of next week's testimony before Congress by Fed Chair Jerome Powell, said central bank officials remain committed to getting inflation back to 2% and noted that when it comes to interest rate policy changes officials “will carefully assess incoming data, the evolving outlook, and the balance of risks.” The release described the overall economy as doing well amid a solid and better-balanced job market and declining inflation pressures.

Employment gains for November and December were revised up in total by 100,000, the Labor Department said.

The market-based probability of a June interest-rate cut dropped to barely above 50% after the University of Michigan Surveys of Consumers showed households think inflation a year from now will be 4.3%, a full percentage point higher than they thought it would be last month, and an earlier report from the Labor Department showing the unemployment rate was 4% in January. Before the reports traders had seen about a 63% chance of a June rate cut.

U.S. stock indexes are drifting lower on Friday after a discouraging report suggested U.S. consumers are bracing for higher inflation over the next year. The S&P 500 was 0.3% lower in morning trading, though it remains on track for a modest gain for the week. The action was stronger in the bond market, where Treasury yields climbed after a report suggested sentiment is unexpectedly souring among U.S. consumers.

The University of Michigan Surveys of Consumers on Friday said its Consumer Sentiment Index dropped to 67.8 from January's final reading of 71.1, which was also the consensus expectation among economists polled by Reuters. The drop occurred across age and wealth groups and weakened regardless of political affiliations, survey Director Joanne Hsu said in a statement.

NEW YORK (Reuters) -A fresh look at the pace of inflation will test the U.S. stock market in the coming week, as investors worry that President Donald Trump's tariff plans are endangering Wall Street's hopes for interest rate cuts this year. The benchmark S&P 500 remained about 1% below record-high levels, even as stocks were whipsawed this week by headlines over Trump's plans to impose tariffs on the largest U.S. trading partners. Tariffs are widely seen as inflationary, complicating the picture for the Federal Reserve.

Wall Street's main indexes fell on Friday after the latest jobs data raised the prospects of a more cautious Federal Reserve, while a survey showed unexpected weakness in U.S. consumer sentiment. A Labor Department report showed the U.S. economy added 143,000 jobs in January, compared with a rise of 170,000 expected by economists. The unemployment rate stood at 4%, compared with the expectations of 4.1%, while the U.S. economy created 598,000 fewer jobs in the 12 months through March than previously estimated.

"I think it's perhaps the future of American hegemony, in terms of our economic status, our economic might," Trump Jr. said.

Success in closing the carried-interest loophole is anything but guaranteed.

For now, he said, the Fed is in "wait and see" mode amid uncertainty over the economic effects of Trump administration policies, he told CNBC. With unemployment at 4% and a cooling rental market poised to help bring overall inflation closer to the Fed's 2% goal, he said, "we're in a very good place to just sit here until we get a lot more information on the tariff front, on the immigration front, on the tax front, etc." Meanwhile, he said, the next two months of inflation data will be paramount in shaping Fed policy, he said.