In a closely watched speech that may set the tone for next week's rate-setting meeting, Federal Reserve Chair Janet Yellen expressed renewed concerns about the health of the U.S. jobs market.
After the economy generated just 38,000 jobs in May, "recent signs of a slowdown in job creation bear close watching," Yellen said.
Still, Yellen expects the economy will continue to improve, allowing for "gradual" rate hikes at an unspecified time.
"If the May labor report was an aberration or reflects a temporary slowdown resulting from the weakness in economic activity at the start of the year, then job growth should pick up and support further gains in income."
Yellen continued to expect stubbornly low inflation to move up over time, she added.
Headwinds from abroad warrant close attention, Yellen warned, citing economic problems in China and the negative impact of a the UK's possible exit from the European Union.
For now, it appears all monetary policy options are on the table. A June rate hike is unlikely but July is still in play, according to comments this morning from Boston Fed President Eric Rosengren.
It is also possible the Fed could delay a rate hike until later in the year.
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