Minutes of the June FOMC meeting released on Wednesday highlighted a cautious committee ahead of the UK’s EU referendum and uncertainty around the outlook for the US labour market following the weak April and May nonfarm payrolls reports. At its meeting, the Fed decided by a 10-0 vote to leave its key policy rate unchanged in a range of 0.25 percent to 0.5 percent.
The June 14-15 meeting, which took place ahead of the UK referendum showed widespread unease over the so-called “Brexit” vote. Members generally agreed that it was prudent to wait for additional data on the consequences of the UK vote. Policymakers also cited a severe slowdown in hiring by US employers as a reason for leaving interest rates steady last month, the minutes showed.
Ahead of Friday’s US payrolls report for June, Thursday’s ADP employment release may provide an insight. Lloyds Bank forecast a rise of 170k in ADP employment, consistent with their 195k expectation for nonfarm payrolls.
The Fed's next meeting will take place in the last week of July. But many analysts think a good jobs report won't be enough to convince policymakers to raise rates then either, especially in light of the uncertainty triggered by the Brexit vote.
“This is a divided committee that is not quite sure how to read the current economic landscape,” said Omair Sharif, economist at Societe Generale.
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