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Fed Debate Shifts From Large Cut to Whether to Cut at All

  • Unexpectedly strong June jobs challenge case for lower rates
  • Fed Chairman Powell testifies before Congress next week
Federal Reserve Board Holds Open Meeting
Photographer: Andrew Harrer/Bloomberg
Updated on

The Federal Reserve’s debate shifted from how much to cut interest rates later this month to whether to move at all after hiring in June trumped the expectations of economists.

Yields on two-year U.S. Treasuries jumped to 1.87% from 1.76% the day before, reflecting reduced odds of the Fed aggressively reducing borrowing costs in the near term. Fed funds futures, which had been indicating some possibility of a half-point rate cut in July before the Labor Department’s data, are now pricing a quarter-point reduction this month, and at one point on Friday even showed that outcome was less than 100% certain.