The Fed declined to raise interest rates at its policy meeting today, fulfilling the expectations of many economists who said a rate hike was unlikely after an exceptionally weak May jobs report.
Fed Chair Janet Yellen raised economists’ expectations that the Fed would hold off on a June hike to near certainty earlier this month when she failed to mention the possibility in a speech.
Yellen did say in that speech, however, that an eventual rate hike was still in the cards.
“If incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2% objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate,” she said.
Most observers had expected a June interest rate hike to be fairly likely at this meeting. But on June 3, the Labor Department reported that just 38,000 new jobs had been created in May. That’s the worst job creation in six years – and about 120,000 fewer jobs than projected.
The disappointing economic news – along with Yellen’s hints in the Philadelphia speech – dramatically dropped expectations of a hike. The CME Group’s futures exchange, which had put the odds of a hike at 21% before the jobs report, lowered them to just 1.9% after the report came out.