Fed Rate Hike Seen As Unlikely This Month In Wake Of May Jobs Report

Date: June 06, 2016 Last Edit: June 07, 2016

Fed Taking Wait-And-See Approach, Unlikely To Raise Rates At Its June Meeting

In the wake of the Labor Department’s May jobs report, which showed the US employers added only 38,000 new hires for the month, analysts say the Federal Reserve Open Market Committee is likely to hold off on an interest rate hike at its June 14-15 meeting. The Wall Street Journal reported Fed officials, who had been sending signals that a rate hike was imminent at one of its next three meetings, are now biding their time. As a result, they may not hike rates at their July meeting either because of the limited number of economic reports that will be released beforehand. In a speech Friday, Fed Governor Lael Brainard, who, like Chairman Janet Yellen, is known for having a cautious approach to monetary policy, said, “We cannot take the resilience of our recovery for granted. … In this environment, prudent risk management implies there is a benefit to waiting for additional data to provide confidence that domestic activity has rebounded strongly and reassurance that near-term international events will not derail progress toward our goals.” Similarly, Reuters said the May hiring data “firmly sank” the Fed’s “unlikely” plans to raise rates in June “and encouraged doves” such as Brainard, “to call for another delay in tightening” monetary policy.

What This Means For Small Business

The Federal Reserve’s reticence on interest rates is leaving small business owners uncertain about the course of the economy and contributes to their lack of optimism. While the Labor Department’s May report was a setback, just prior to its release, Fed officials had signaled they believed it was time to tighten monetary policy. As NFIB Chief Economist Bill Dunkelberg told CNBC, “The major impact of Fed policy, or lack thereof, is basically producing immense uncertainty and no confidence. So people won’t put their money on the table, they won’t expand, they won’t hire.”

Additional Reading

The AP also reported on Brainard’s speech in Washington.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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