A couple of weeks ago financial markets were pricing the prospect of a June rate rise at a mere 4% probability.

Since then the odds have shifted somewhat partly as a result of significant amounts of chatter by Federal Reserve officials unhappy that markets appeared to have dismissed any prospect of an increase in rates at all this year.

While most of these Fed officials have been non-voting members of the rate setting committee there has been some notable interventions from some members who do have a vote, and who have in the past tended to lean towards a much easier monetary policy style approach.

When policymakers like Eric Rosengren, who does have a vote this year, the head of the Boston Fed speak markets tend to listen more closely, particularly if he deviates significantly from a policy view that he is normally closely associated with.

During a large part of last year markets had been expecting some form of rate move from the US central bank and for a good part of that the Boston Fed chief had been one of many Fed officials arguing against such a move.  His comments in the past two weeks that the Fed is close to passing the test for a June rate rise are significant in this context, and while many on the committee may not share this view they are probably more likely to be in a minority, than they were a year ago..

In this context this week’s US payrolls data for May is likely to act as a signpost to the timing of a move in June or July, though after a slightly disappointing April number, the main focus is still expected to be on how quickly prices and wages are rising.

The Fed also has another dilemma when it comes to looking at this week’s data; the US manufacturing sector is currently on its knees, while there is some evidence that the consumer side of the economy might be picking up, the evidence thus far is still of a fairly weak recovery.

The US economy grew slightly above 0.1% in Q1, and while we’ve seen a pickup in retail sales and new home sales in April there is little to suggest that it is anyway sustainable.

In short this week’s data is unlikely to make a June rate rise any more or less likely, given that eight days after the Federal Reserve meets the UK votes in the long awaited EU referendum.

Ultimately any US decision on rates will have to be balanced against the prospect of the plague of locusts we are told will follow if the UK votes to leave the EU.

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