Fed Hike Odds Rise to 60% Amid Strong US Payrolls
The strong US payrolls data has lifted the odds of a September Fed hike to around 60%, according to BNY's Geoff Yu. This increase in rate expectations is highly dependent on upcoming data releases, particularly inflation numbers.
This week marks the start of the Federal Reserve's two-week communications blackout, leaving markets to focus solely on economic data. The most important release this week will be the August Consumer Price Index (CPI), which will shape whether last week's jobs strength is seen as a confirmation of resilient underlying demand or an isolated labor-market outlier.
A firm print across both the overall and core measures of CPI would likely reinforce the case for a September hike, potentially extending the recent backup in short-end rates. On the other hand, a softer CPI reading would give markets room to fade some of the renewed tightening odds, especially with the Fed sidelined and unable to steer the narrative.