Federal Reserve policymakers will probably leave interest rates unchanged when they meet later this month, but keep the door open to a rate hike in July, after a government report on Friday showed employment rose in May, but pay gains slowed.
At its June 13 - 14 meeting, Traders will see about a one-in-three chance that the Fed will deliver an 11th straight rate increase, up from about one-in-four ahead of the Labor Department report, that showed employers added 339,000 jobs in May, far more than the 190,000 economists had expected.
Average hourly earnings, however, rose 4.3% from a year earlier, down from a 4.4% increase in April, and the unemployment rate rose to 3.7% from 3.4%, both signs that heat may be coming out of the labor market.
What is the mythical soft landing? Does it look like that, said Kim Forrest, Bokeh Capital Partners' chief investment officer. This low-wage inflation number is a good news for those who believe the Fed should stop increasing interest rates. The strong employment gains remained alive in financial markets for the Fed to raise its benchmark rate another quarter point, to the 5.25% - 5.5% range by July.
Achieving that outcome is about twice the likelihood of continued hold as a continued hold, but there is plenty of data between now and then that could sway those bets one way or another.