July rate cut expectations failed, US non-farm employment growth exceeded expectations in May
The latest data released by the US Department of Labor showed that in May this year, the US unemployment rate rose by 0.1 percentage point month-on-month to 4.0%. At the same time, the number of new jobs in the non-agricultural sector reached 272,000, which was far higher than the market's general expectation of 185,000.
Although the Bank of Canada and the European Central Bank cut interest rates this week, and Switzerland and Sweden had already taken the lead in cutting interest rates, when the Fed will follow suit has become a hot topic in the market. Changes in the labor market are seen as one of the important factors affecting the US inflation trend and the Fed's interest rate policy, adding to market uncertainty.
Based on this, analysts believe that the Fed's expectations for rate cuts have been significantly reduced. According to data provided by the Chicago Mercantile Exchange's "Fed Watch Tool", after the release of the employment report, the market's expectations for rate cuts this year were lowered. At present, the market expects that the Fed will keep the federal funds rate unchanged in June with a probability of up to 97.6%, while the probability of raising interest rates by 25 basis points is only 2.4%.
By August, the market expected the Fed to keep interest rates unchanged at 91.1%, a figure that was 78.5% before the release of non-farm data. At the same time, the market expected the probability of a cumulative 25 basis point rate cut to be 8.8%, from 22.0% previously, while the probability of a cumulative 50 basis point rate cut fell to 0.1%, from 0.5% previously.
