Wall Street investment bank Goldman Sachs (GS) says the U.S. Federal Reserve is unlikely to cut interest rates in June following a hot jobs report.
Goldman Sachs now says that the U.S. central bank is most likely to deliver its first interest rate cut of the year in July, at the earliest. Economists at Goldman Sachs had previously forecast a rate cut in June but have pushed that expectation out to July after a stronger-than-expected U.S. labor market report for April.
Data released on May 2 showed that nonfarm payrolls during the month of April increased a seasonally adjusted 177,000, slightly below the downwardly revised 185,000 in March but above the consensus estimate of economists polled by Dow Jones Newswires that called for 133,000 jobs. The U.S. unemployment rate held steady at 4.2% in April, as expected.
The strong jobs report in April came as a surprise and has sparked a relief rally on Wall Street. Many economists and market watchers had expected the April jobs report to show a weakening labor market in the U.S., and for signs to emerge of import tariffs and trade wars taking their toll on America’s economy. But instead, employment across the U.S. remained fairly robust.
According to the CME FedWatch Tool, as recently as this week, 78% of futures traders were expecting the U.S. Federal Reserve to cut interest rates by 25-basis points at its next policy meeting om June 18. However, Goldman Sachs says that’s too optimistic after the stronger-than-expected April labor report. Goldman says the first rate cut isn’t likely until Fed officials convene on July 30 of this year.
Other economists and analysts are likely to revise their interest rate outlooks in the wake of the April jobs report. GS stock is flat on the year, having declined 0.82%.