Despite earlier projections of continuous rate hikes, the Federal Reserve is now anticipated to put the brakes on its rate hiking agenda for the time being. The change in attitude has been driven by recent data showcasing a slowdown in inflation coupled with a slightly cooling labor market. Currently, the probability of the Fed refraining from an interest rate hike in their meeting today stands at 93%, according to the CME FedWatch Tool.

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The inflation rate for May was more subdued than expected, coming in at 4% year-over-year, indicating a relaxation in both food and energy prices. This inflation rate, lower than the 4.2% forecast by economists, combined with a slightly diminished core CPI (Consumer Price Index) figure, might have tipped the scales for a pause in interest rate hikes. However, it's pertinent to remember that the present inflation level is still double the Fed's target rate of 2%.

The labor market data also showcases a complex picture. While 339,000 jobs were added in May, there was also a slight rise in unemployment to 3.7%, and a minor reduction in wage growth. These mixed indicators have prompted calls from several Fed officials for a breather in rate hikes, in order to better evaluate the impacts of the central bank’s monetary-policy tightening and recent events on overall economic activity.

Notwithstanding the decelerating inflation, experts caution that the current drop in price growth shouldn't completely rule out future rate hikes. In fact, the odds of a quarter-point interest-rate hike in July stand at 60.6%. The Federal Reserve, in its efforts to balance the economic equilibrium, is expected to keep the door ajar for potential rate increases down the line if economic data necessitates such a move.

Today's announcement from the FOMC (Federal Open Market Committee), slated for 2 a.m. GMT+8, is expected to offer more clarity on this. Fed Chair Jerome Powell is scheduled to provide more insights during a press conference at 2:30 a.m. GMT+8. Investors, in the meantime, should keep a keen eye on these developments, as any decision from the Fed is likely to significantly impact the market sentiment.

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