A surprise in the latest U.S. jobs report has significantly cooled market expectations for an imminent rate cut by the Federal Reserve.
According to data released by the U.S. Department of Labor, nonfarm payrolls grew by 147,000 in June. While slightly below market forecasts, the bigger surprise came from the unemployment rate, which unexpectedly fell to 4.1%. This shows the labor market remains resilient, prompting investors to reassess how soon the Fed might move to lower interest rates.
Based on the latest interest rate futures, traders now see only a 5% chance of a rate cut at the Fed’s late July meeting—down sharply from around 25% just earlier. Expectations for the number of rate cuts this year have also been revised lower, from three to two.
The next Fed policy meeting is scheduled for July 29–30. With job growth holding steady and inflation still a concern, the central bank may prefer to wait for clearer signs of an economic slowdown before taking action.
It’s important to highlight that Fed policy decisions have a broad reach—affecting everything from mortgage rates and credit card interest to business financing costs. That’s why investors, companies, and households pay close attention to every signal the Fed sends.
For now, the focus shifts to upcoming comments from Fed officials and additional economic indicators. These factors will play a key role in shaping market expectations for where rates are headed next. In the weeks leading up to the July meeting, there could be more developments worth watching.
