Labor market figures released last Friday offered no signs of deterioration, reinforcing expectations that the Fed will hold interest rates at their current level of 4.25% to 4.50% at its upcoming June 17–18 meeting. That view was shared by 103 out of 105 economists polled by Reuters between June 5 and 10.
A narrow majority—59 of the 105 economists—foresee a rate cut in the third quarter, most likely in September, in line with current market pricing. But that outlook remains unchanged from the previous month, suggesting that the central bank’s stance remains firmly cautious.
US Treasury yields rose sharply after a stronger-than-expected May jobs report, tempering investor expectations for Federal Reserve interest rate cuts this year. The 10-year yield climbed to 4.46%.https://t.co/qef1EXJZhB
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“As long as the labor market looks fine, we expect the FOMC to continue to stay on hold, and use rhetoric to bolster their inflation-fighting credibility. Until there is a cost, why signal otherwise?” Jonathan Pingle, chief U.S. economist at UBS, told Reuters.
“At the moment ‘grey area’ seems more ‘charcoal’… the Committee is facing a substantial amount of uncertainty.”
Much of that uncertainty stems from the administration’s tariff policies, which have pushed trade tensions higher. Recently, aluminum and steel tariffs were doubled to 50%, fueling fears of entrenched inflation. U.S. officials are in discussions with their Chinese counterparts in London, but a comprehensive agreement remains elusive.
