Strong August payrolls revive September Fed hike bets
Futures pricing moved to a 58% chance of a 25-basis-point increase after hiring beat expectations, with inflation data next week carrying the next test.
Strong August payrolls revived September rate-hike bets Friday, pushing stocks and short-dated bonds lower as swaps priced an over 50% chance the Federal Reserve raises rates this month, according to Bloomberg.
Fed funds futures were carrying a 58% probability of a 25-basis-point hike, StoneX's Michael Boutros wrote in a FOREX.com market note that described the payrolls report as underscoring the resilience of the US labor market.
That is an unusual position for hiring data to occupy. Job growth is being read not as evidence of an economy that can absorb more workers but as a reason to make credit more expensive.
The wage side of the picture looks calmer. The August Beige Book, released Sept. 2, showed wages and prices rising moderately across the country, Bloomberg reported. Strong hiring, alongside the Beige Book's moderate wage and price readings, leaves next week's August PPI and CPI readings, rather than the payrolls print alone, carrying the weight of the September decision.
The rate question is also political. President Trump demanded a rate cut, while Kevin Warsh is facing White House pressure over the same question, Bloomberg reported in Sept. 4 programming.
The inflation releases land next week, ahead of the Fed's September decision.
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