In a climate of economic uncertainty, the Reserve Bank of Australia (RBA) has once again opted to raise interest rates. Conversely, the US Federal Reserve, facing similar headwinds, is likely to hold off on rate changes in its upcoming June meeting.
Globally, indicators such as the ISM Services PMI Index in the US, paint a worrying picture of the economic outlook. The Index dipped from 51.9 to 50.3. The May ISM report heightens concerns, with some analysts arguing the manufacturing sector is already entrenched in a recession following seven consecutive ISM readings below 50 for the sector.
This challenging landscape makes the sustainability of employment in the coming months seem tenuous. It would seem prudent for the US Fed to postpone the next rate hike to gain further insight from incoming data. Yet, the market is sceptical. If the Federal Open Market Committee (FOMC) opts to pause at the June meeting, justifying a rate hike in July may prove problematic for the Fed.