The Federal Reserve is likely to keep its key interest rate unchanged next week, futures traders indicated Friday, even as two key gauges of consumer activity highlighted waning confidence in the world's largest economy.

The University of Michigan's consumer sentiment index, a benchmark for confidence in an economy that relies on consumer spending for nearly two thirds of its growth, slipped to 97.9 points this month, down from a reading of 100 points in May an narrowly shy of Street forecasts. Retail sales for the month of May also disappointed, rising only 0.5% as job market growth cooled and the threat of tariffs on Chinese and Mexican-made goods kept shoppers cautious.

However, upward revisions for retail sales figures from April and March, as well as a firm reading of the current economic situation from the University of Michigan survey, has interest rate traders paring bets on any move from the Fed following its two-day interest rate meeting that ends on June 18. Instead, investors are doubling-down on a July move now that consumer inflation expectations are pegged at an all time low of 2.2% and China's industrial economy continues to suggest a sharper-than-expected trade war slowdown.

The CME Group's FedWatch tool, which gauges rate cut probability, is pricing in just a 24% chance of a cut next week, down from 25% earlier this month, while the chances of a July move had risen to 88.4%, with the bulk of traders expecting a 25 basis point rate cut that would take the key target range to between 2% and 2.25%.

Slowing inflation is likely the Fed's strongest argument for a rate cut, particularly when retail sales gains are trending at an annualized rate of around 3.25%. The Atlanta Fed's GDPNow forecasting tool, a real-time indicator of economic health, suggests a second quarter growth rate of 2.1%, down from the 3.2% pace recorded over the first three months of the year but still well ahead of most G20 economies. 

Inflation expectations, however, are not only hitting an all-time low, as measured by the University of Michigan forecast, but are also bringing down tradeable consumer price gauges on Wall Street.

The so-called TIPS/Tens spread, which tracks the difference between inflation-protected bonds and benchmark Treasury notes, touched a January low of 1.664% Friday, while the similar "breakeven" rate for five-year notes slipped to 1.504%.

Both data points, alongside the consistent signals of a China-led slowdown in global growth, could provide Fed Chairman Jerome Powell with enough ammunition to justify a near-term rate cut without having to face allegations that he's bowing to pressure from President Donald Trump.

Goldman Sachs analysts, however, aren't expecting the Fed to lower rates at all this year, even as Trump renews his criticism of the central bank's chairman.

"It's more than just Jay Powell," Trump told CNBC's Squawk Box program Monday when asked why he remained critical of the Fed's interest rate policy. "We have people on the Fed that really weren't ... they're not my people," he said. "They certainly didn't listen to me because they made a big mistake. They raised interest rates far too fast."

Goldman economist Jan Hatzius called their forecast a "close call", but stuck to the bank's prior view that the Fed will hold rates steady until at least 2020.