The U.S. Federal Reserve is anticipated to keep interest rates steady in 2024 following better-than-expected labour market performance in May, where non-farm payrolls exceeded forecasts. Market reactions saw U.S. Treasury yields and the dollar rise while stocks dipped, with experts suggesting that rate cuts may be postponed due to the robust job growth and inflation trends.
The U.S. Federal Reserve might keep interest rates steady throughout 2024 after stronger-than-expected labor market data for May. According to the U.S. Labor Department’s Bureau of Labor Statistics, non-farm payrolls increased by 272,000, well above the forecasted 120,000 to 185,000. The unemployment rate, however, rose to 4%, the first time surpassing this threshold since January 2022. This robust job growth occurs alongside a consumer price inflation rate of 3.4% for April.
Market reactions included a rise in U.S. Treasury yields and the dollar, while stocks fell as investors pushed back expectations for the first Fed rate cut. Money markets had anticipated a rate cut by September or November, but probabilities have since lowered.
Industry experts like David Goebel of Evelyn Partners and Neil Birrell of Premier Miton Investors commented that the labor market’s strength may delay Fed rate cuts. Additionally, Hetal Mehta from St. James’s Place noted that if current trends persist, it is unlikely the Fed will cut rates by December.
Reflecting on international actions, the European Central Bank and Bank of Canada have recently cut rates, but similar moves by the Fed are not expected in the near term. Future projections indicate a 50% chance of rates falling in the September meeting and roughly a 10% chance of maintaining the current interest rate range of 5.25% to 5.5% by the year’s end.
