The argument for a June interest-rate hike from the Federal Reserve has evaporated.
Economists and investors largely agreed that a disappointing employment report for May — the U.S. economy added just 38,000 new jobs — largely eliminated the chance that Fed officials would tighten policy when they meet June 14-15 in Washington, and may make it difficult for them to raise in July.
“As cautious as this Fed has been, it’s hard to imagine that they’re going to go after a report like this,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in New York.
Comments from Fed officials in recent weeks, including Chair Janet Yellen on May 27, had signaled they were in favor of a rate increase in coming months, with a couple of policymakers going out of their way to raise investor expectations for a move at either their June or July meeting. Yellen speaks again on Monday.
Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, said the report “raises some questions about the momentum of growth and about the outlook.”
“This takes June off the table for a Fed hike,” he added. “To get to July, we’re going to need a pretty nice rebound in the data.”