JPM, Citi maintain July rate cut expectations

Ahead of the critical US nonfarm payrolls data to be released today at 15:30 GMT, two major Wall Street banks, JPMorgan and Citigroup, maintain their expectations for a July rate cut from the Fed. Citi’s US chief economist Andrew Hollenhorst said in a note he published on Wednesday that they expect four rate cuts this year, and that the July rate cut will depend on the weak employment data to be released today. The Citi economist predicts that the US economy will create 140,000 nonfarm jobs in May, and that the unemployment rate will rise from 3.9 percent to 4 percent. JPMorgan expects 150,000 nonfarm jobs. The bank’s US chief economist Michael Feroli stated in a note he published in mid-May that expectations for a July rate cut were based on weakening inflation in April, and that this should be accompanied by weak employment data. In the swap market, November is being priced in for the first Fed rate cut. Nonfarm payrolls data will be the last important piece of data to come before the Fed, which meets next week to make an interest rate decision. The median expectation in the Bloomberg survey is 180,000 jobs. Bloomberg economists, led by Anna Wong, expect a relatively high employment of 222,000. However, economists also note that the household survey points to an increase in the unemployment rate.