Citigroup believes that the policy makers of the Federal Reserve may have to wait until September to take action, while Morgan Stanley predicts that the federal funds rate range will not change before November; Economist Adrian also said, "Regardless of how next week's CPI data turns out, the possibility of a rate cut in July has disappeared."
After the better-than-expected non-farm report in the United States, the two banks that had previously insisted on predicting the 'first reduction' of the Federal Reserve meeting in July - Citigroup and JPMorgan finally made concessions.
According to the report released by the US Department of Labor before the market opened, the number of new non-agricultural jobs in the United States in May was 272,000, and the unemployment rate increased by 0.1 percentage points to 4%. In addition, the average hourly wage increased by 0.4% on a month-on-month basis, and the year-on-year increase was 4.1%, which was higher than the market's expected 0.3% and 3.9%.
After the data was released, Citigroup believes that the policymakers of the Federal Reserve may wait until September to take action, while JPMorgan expects that the range of federal funds rates will not change before November.
"We are pushing back our most likely first cut timing from July to September," wrote Andrew Hollenhorst, chief US economist at Citigroup.
He pointed out that although the labor market and the economy appear to be slowing down, last month's 'surprising strong employment growth' may keep the central bank's original position and wait for more data on the cooling of economic activity and inflation.
"Recent employment growth momentum indicates that the 'broader labor market weakness' needed for the Fed's rate cut may take more than three months to achieve," wrote Michael Feroli, chief US economist at JPMorgan, in a report released shortly before the publication of the draft.
Economist Adrian also said that the May non-farm is a very strong report in terms of employee demand and wage payments. 'Regardless of how next week's CPI data is, the possibility of a rate cut in July has disappeared. Based on this data, the Fed cannot cut interest rates in July or send out a signal to reduce interest rates.'
Citigroup still predicts that the Federal Reserve will cut interest rates by 25 basis points three times this year, in September, November and December. Previously, the bank predicted four times, with one meeting in each of the four meetings in the second half of the year. JPMorgan's adjustment is slightly larger, and the bank has cut it from three times to only once.
The 'dot chart' announced by the Federal Reserve in its December 2018 and March decisions both showed that the overall median central bank rate at the end of 2024 was 75 basis points lower than the current level. However, officials have repeatedly emphasized that they need to see several months of good inflation data before they take action.
Editor/Emily