BNP Paribas: Likelihood of Fed Action in July Diminishes

Odaily Odaily reports: "If the nonfarm payrolls for July are very strong, approaching or exceeding 130,000, then I believe the July meeting will be full of suspense. The uncertainty may now be lower, but in my view, the case for the Fed to raise interest rates remains valid," said Isabelle Mateos y Lago, Chief Economist at BNP Paribas. Before the start of the July 4th holiday, the short-term interest rate futures market priced in roughly a 20% probability of the Fed raising rates at its July 29th policy decision, down from 33% before the nonfarm payroll report. Markets still expect the Fed to raise rates by 25 basis points this year, but not until as early as December.

Regarding the European Central Bank, Lago stated: "The baseline expectation remains for another rate hike in September. However, it's worth noting that Governing Council members who spoke at the Sintra conference did not rule out the possibility of foregoing this additional hike." She warned that the normalization of energy supply could take six months or longer to take effect, and inflation in the eurozone could accelerate again. Even so, she believes consumer prices in regions outside of those affected by energy are not facing pressure. (Jin Shi)