2 days ago
Strong Jobs Data Puts Fed September Rate Decision In Focus
The Federal Reserve will soon decide whether to change interest rates.
A new report showed that the United States added many more jobs than economists expected in August.
The unemployment rate stayed at 4.1%.
This made investors think a rate increase might be more likely.
Markets estimated a 60% chance of a quarter-point hike at the September meeting.
However, the Fed is also waiting for new inflation data.
If inflation is lower than expected, the Fed may leave rates unchanged.
If inflation is higher than expected, a rate hike could become more likely.
Higher oil prices and tensions in the Middle East are also making inflation a concern.
US nonfarm payrolls increased by 162,000 in August, exceeding forecasts for a 56,000 gain.
The unemployment rate remained at 4.1%, while July payroll figures were revised upward.
Markets priced in about a 60% chance of a quarter-point Fed rate hike at the September meeting.
August inflation data is the next major test for the Fed’s policy outlook.
Elevated oil prices and Middle East tensions are adding to concerns about inflation.
- Who
- The US Federal Reserve, investors, economists, and traders.
- What
- Markets are reassessing whether the Federal Reserve will raise interest rates at its September policy meeting.
- Where
- The decision concerns United States monetary policy; the meeting is referred to as the FOMC meeting.
- When
- The meeting is scheduled for September 15–16, with August inflation data due on September 11.
- Why
- Stronger-than-expected job growth, persistent inflation, higher crude oil prices, and Middle East tensions are influencing expectations.
Rate Hike Case
Rate Hold Case
Labor-market strength
Rate Hike Case
The 162,000 increase in August payrolls, stronger industry hiring, and upward revisions to July support the case that the economy can withstand higher rates.
Rate Hold Case
David Kohl said seasonal-adjustment effects contributed heavily to the surprise, meaning the headline strength may overstate the underlying improvement.
Inflation outlook
Rate Hike Case
A higher-than-expected August inflation reading, combined with elevated energy prices and Middle East tensions, could increase pressure for a rate hike.
Rate Hold Case
Kohl expects inflation excluding energy to decline, which could allow the Federal Reserve to leave rates unchanged again.
Market expectations
Rate Hike Case
Fed funds futures shifted to roughly 60% odds of a quarter-point hike after the jobs report.
Rate Hold Case
Before the jobs data, markets were evenly split between a hike and no change, and the final decision remains dependent on the inflation report.
Key facts
- August payroll growth
- Nonfarm payrolls rose by 162,000.
- Forecast
- Economists had expected a gain of 56,000 jobs.
- Unemployment rate
- The rate held steady at 4.1%.
- Market-implied hike probability
- Traders priced in about a 60% chance of a quarter-point increase.
- September meeting
- The Federal Reserve’s policy meeting is scheduled for September 15–16.
- Next key data
- The August inflation report is due on September 11.
- Inflation target
- Inflation has remained above the Fed’s 2% target for 5½ years, according to the article.
Quotes
David Kohl
Chief Economist at Julius Baer
“We expect the inflation trend excluding energy to decline, enabling the Fed to hold rates unchanged once more.”
livemint.com
Sources
Related news
US Jobs Surge Complicates Federal Reserve Rate Decision
Strong Jobs Report Pressures Fed Toward September Rate Hike
US Jobs Expected to Rebound as Rate Hike Debate Intensifies
Strong Jobs Report Raises Stakes for Upcoming Inflation Data
Dollar slips as traders weigh Fed hike odds, jobs data
July Fed Minutes May Shape September Rate Decision
Middle East Tensions Push Oil Toward $100, Weighing US Stocks
Wall Street Rallies as Waller Eases Rate Hike Fears
U.S. Treasury Yields Fall as Waller Dents Rate Hike Bets
Markets Expect Fed Rate Hike Despite Trump’s Lower-Rate Push
