Mohamed El-Erian, the dean of Queen's College, University of Cambridge and former chief economist of Allianz, said that the strong jobs data in May in the United States closed the door on a rate cut in July by the Federal Reserve.

El-Erian said in an interview on Friday that the report showed a very strong performance in terms of staff demand and wage payments.

The non-farm payroll growth rate in May far exceeded expectations, with non-farm payrolls rising to 272,000 last month, higher than economists' expectations of 180,000, and data for April being slightly revised down to 165,000. The unemployment rate rose slightly to 4%, while the month-on-month wage growth rate accelerated from 0.2% in April to a higher-than-expected 0.4%.

El-Erian said:" No matter how next week's Consumer Price Index(CPI) data is , it has indeed closed the door on a rate cut in July. With these data, they cannot cut rates in July or send out rate-cutting signals."

He added:"But, to step back and think about how to coordinate with other data, the story becomes more interesting. What you see is retrospective data is strong, and forward-looking data is weak. We have to try to reconcile the contradictions between the two."

Next week, the Federal Reserve will end its two-day policy meeting after the release of May CPI data. These data, combined with the May employment report, will guide the Federal Reserve in updating its economic and interest rate forecasts for the rest of this year and 2025.

Federal Reserve officials hinted in March through the so-called "dot plot" that there would be three rate cuts this year. Traders will focus on whether they will downgrade this prediction and how much they will upgrade the current long-term rate prediction of 2.6%.

El-Erian expects the Federal Open Market Committee (FOMC), which is responsible for formulating policies, to indicate that there will only be one rate cut this year, and that Federal Reserve Chairman Powell will "maintain maximum flexibility" and "keep his data-dependent mantra".

El-Erian says the debate about rate cuts will continue because "we are in an environment of slowing economy" and there are "no spare tires" in the form of savings and fiscal spending during the U.S. epidemic. He said:" If the Federal Reserve makes a misjudgment and the economy slows down too quickly, it will be a difficult mistake to correct."

Editor/Emily