Fed Hesitates on Rate Hike Due to Midterm Elections
Wharton finance professor Jeremy Siegel believes the Federal Reserve would already be raising interest rates if not for the upcoming midterm elections. According to him, the strong August jobs report, which showed a gain of around 162,000 jobs and an unemployment rate of 4.1%, gave the Fed all it needed to hike rates.
Siegel's view is backed by data, including job openings rising to 7.27 million in the latest JOLTS release. This has pushed September rate-hike odds towards 60% according to Wells Fargo Chief Economist Tom Porcelli. The jobs market's strength is particularly good for blue-collar workers, but also raises concerns about inflation and interest rates.
The Consumer Price Index (CPI) reached a fresh cycle high of 332.8 in July, while the core Personal Consumption Expenditures index, the Fed's preferred inflation gauge, printed 130.66, also a new peak. If the Fed does hike rates at its September meeting, it could have significant consequences for working-class borrowers with variable-rate consumer debt.