Anything said before the employment report is already dated and not very informative with respect to the prospects of a June or July hike, with an important exception. What remains relevant is what was said about Brexit. In our view, Brexit had already pretty much taken June off the table. And the outcome of the Brexit vote hangs over July. But more importantly, the dramatic slowing in payroll growth in April and May alone makes a July hike unlikely, given there will be only one additional employment report and Q2 GDP will not yet be available. In any case, before the report we heard from Evans, Bullard, Tarullo, Powell, and Kaplan. Evans and Tarullo were clearly already opposed to a move in June before the employment report. Kaplan was in the June or July camp and Bullard was withholding judgment about June or July until the June meeting. But Kaplan was more inclined toward a July hike as a result of Brexit risk, and based on earlier talks, Bullard was unlikely to support a June hike in any case.
After the employment report, we heard from Brainard, Mester, Rosengren, and Lockhart. Brainard would not have supported a June rate hike anyway, but the employment report reinforced for her the importance of a risk management approach and a “wait and see” posture. Of course, that’s the case for everyone now, including Rosengren, who said that, in light of the employment report, “it will be important to see whether the weakness in this report is an anomaly or reflects a broader slowing in labor markets.” Echoing Rosengren’s views, Lockhart said, “I don’t personally see a lot of cost to being patient to the July meeting at least.” and added, “I am more inclined to think in terms of two moves [this year.]”
Mester was the most optimistic, saying that the “weak employment report number has not changed fundamentally my economic outlook…The economy is definitely moving in the right direction.” So while we don’t see her as likely to want to hike in June, she is perhaps more hopeful that the data may provide sufficient confidence to support a hike in July.