In focusing on labor, the Fed is highlighting the part of the U.S. economy which has been posting the strongest, most consistent results. U.S. employers have added an average 208,000 workers each month in 2015 after hiring a monthly average of 260,000 last year.
There’s a 39 percent probability the Fed will raise rates at or before its September meeting, based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff. That compared with a 40 percent probability before the Fed announcement.
The likelihood of a rate increase at or before the December meeting is about 70 percent.
“The most important thing the Fed is trying to communicate is not the timing of the first liftoff, but the pace, and continuing to try to counsel the markets about the pace being gradual,” said Roger Bayston, senior vice president and director of fixed income at the Franklin Templeton fixed-income group in San Mateo, California.