The market brought forward its expectation of a Fed interest rate cut
Following the weak US non-farm employment data, market actors lowered the Fed’s interest rate cut expectations from November to September.
Weak employment data also changed Fed expectations in US markets.
The market’s expectation for the first interest rate cut was moved from November to September after US non-farm employment growth fell below expectations in April.
Non-agricultural employment in the USA increased by 175 thousand in April, despite the expectation of an increase of 240 thousand. The increase in average hourly earnings was also below market expectations.
Before the data, the market had brought forward its interest rate cut expectation due to the Fed decision and Fed Chairman Jerome Powell’s statements.
Following the statements from the Fed, the first interest rate cut expectation was moved from December to November.
The Fed has confirmed it needs more evidence that price increases are moderating before cutting interest rates from two-decade highs.
“The data so far this year have not given us greater confidence that rate cuts are particularly appropriate,” Fed Chairman Jerome Powell said at the press conference. Inflation data came above expectations. “Gaining that kind of trust will probably take longer than previously expected,” he said.
Powell stated that it is unlikely that the Fed’s next move will be to raise interest rates, saying that Fed members need to see convincing evidence that policy is not tight enough to reduce inflation to its 2 percent target, and added, “We do not see evidence that supports this conclusion.”