Analysts at National Bank Financial notes that the US payrolls surprised on the upside in June with a gain of 224K (+191 K for private sector) with limited revisions to two previous months (-11k), leaving the average nonfarm payroll gains at 171K over the last three months, in line with its previous 6–month average.

Key Quotes

“Still, recent inflation data were muted. FOMC participants, at the June meeting, revised down their inflation projections, as well as their estimates of the real neutral rate. In other words, the current policy stance now appears to be somewhat tighter than they previously intended.”

“With the balance of risks appearing somewhat tilted to the downside for global growth, this is not the time to let monetary policy drift into a slightly restrictive stance. In that context, we see the FOMC lowering the fed funds target range by 25 bps on July 31th and again in Q4.”