Wall Street's top banks see the Federal Reserve as being on track to raise interest rates at its policy meeting later this month even after a government report showed a severe pullback in hiring in May, a Reuters poll showed on Friday.
The drop in May's jobless rate to a 16-year low, together with a decent rise in wages, were seen as enough for Fed policy-makers to raise rates for the third time since last December as they seek to scale back monetary stimulus, according to the banks' economists.
"The overall report shows a continued tightening in labor markets and should help solidify the Fed's decision to hike rates in June," said Mark Doms, senior economist at Nomura Securities International, one of 23 U.S. primary dealers that do business directly with the Fed.
Still, the slower payrolls growth combined with unexpectedly soft inflation in March and April raised questions as to when the central bank may increase rates again after June.
The 18 primary dealers surveyed on Friday expected the Fed to increase the target range on key overnight borrowing costs by a quarter point to 1.00-1.25 percent at its June 13-14 meeting.
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