The Fed forecast that everyone's watching: Chart of the Week
Of the Fed's anticipated moves, that is. And on Thursday, a surprisingly robust June jobs report dramatically lowered the likelihood of a rate cut this month.
Reflected in the chart that everyone's watching, the central bank is on a path to hold steady, reaffirming the view that the economy is in strong enough shape for policymakers to wait for more clarity on tariffs or for further signs of trouble.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
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A sudden reversal after Wednesday's data from ADP that showed weakness in private payrolls, the employment report appeared to end increasing speculation that the Fed would step in at the end of the month to protect a deteriorating labor market.
"While there were some elements of softness beneath the better-than-expected headlines, the June employment report was strong enough to allow the Federal Reserve to keep policy on hold as it monitors the impact of tariffs on inflation," said Nancy Vanden Houten, lead US economist at Oxford Economics.
As our Chart of the Week shows, markets are now pricing in just a 5% chance the central bank lowers rates at its July meeting, down from a 24% chance seen a day prior, according to the CME FedWatch Tool.
The promising jobs data even shifted expectations further down the calendar. Traders grew more skeptical of a September cut from the Fed, with markets now pricing in a 68% chance the Fed reduces rates then, down from a 94% chance observed a week ago.
Jeffrey Roach, chief economist at LPL Financial, said the Fed can comfortably sit in 'wait and see' mode with payrolls like these, but noted that "the administration is still actively negotiating details with several major trading partners and the eventual business impacts are unknown." In other words, a lot can still happen.
The chart as a stand-in for a preview of Fed policy carries political implications.
Just a day before the jobs numbers came out, President Trump unleashed his harshest criticism of Fed Chair Jerome Powell. In a Truth Social post Wednesday night, the president said Powell "should resign immediately," amplifying what has been an intensifying White House pressure campaign against the central bank leader. And on Thursday, Treasury Secretary Scott Bessent questioned the Federal Reserve's judgment on interest rates, suggesting their benchmark rate is too high.
While the forecast chart itself isn't a Fed product, it's a reliable indicator of the direction of Fed policy, at least in the moment. As a gauge that's closely monitored by Wall Street and the financial press, it both reflects the market's thinking and has the ability to influence it.
That's all to say that the sizable shift toward no cutting in July will likely add to the administration's displeasure with Powell — and play-by-play is sure to continue on July 15 when we get a fresh reading from the other side of the mandate with the Consumer Price Index's inflation numbers.
But as far as the market's concerned, it's... not. The good news of a healthier-than-expected labor market pushed the S&P 500 and Nasdaq to new all-time highs.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.
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