Headline numbers from the June jobs report took pressure off the Fed to cut interest rates later this month, likely leaving the central bank on hold, much to President Trump’s angst. The latest job figures showed that US employers added 147,000 jobs last month, exceeding estimates, while the unemployment rate ticked lower to 4.1%, according to the Bureau of Labour Statistics. Those solid figures, however, masked weakness in private payrolls and other potential warning signs of deterioration in the labour market, a trend that could change the outlook later in the year.
- Interest-rate swaps showed traders saw almost no chance of a Fed rate reduction at the July 29-30 meeting, compared with the roughly 25% probability seen before the report. The possibility of a move in September was reduced to about 75%.
- Expectations for Fed cuts this year have waxed and waned since December, with markets focusing more on the when, not if, the Fed will cut – the doves will leave it late to get their two cuts in before Christmas.
President Donald Trump and his advisers have been weighing replacements for Federal Reserve Chair Jerome Powell, but they’re running into one significant complication: It’s not clear that Powell will leave the US central bank next year. The Fed chief has repeatedly declined to say whether he will step down when his four-year term as chair expires in May, or remain on the Fed board, something he could technically do until his tenure as a governor expires in January 2028. The president said he has “two or three top choices” on Tuesday to succeed Powell potentially, but he declined to name them. In recent weeks, Trump’s advisers have even discussed with him the possibility that Scott Bessent could simultaneously serve as Treasury secretary and Fed chair – either way, a Trump replacement will see a more aggressive path of rate cuts.
- We can see the US 2s rotating around 4% until further notice.
