Kalshi Traders Downgrade Fed Rate Hike Odds as US Economy Slows

The Federal Reserve's upcoming decision on interest rates has taken a significant turn. Kalshi traders now expect a hold at 65%, and a 25-basis-point hike has fallen to 33%. This shift in expectations comes after the latest jobs report, which showed that the US economy shed 23,000 jobs in July. The unemployment rate dropped to 4.1%, but the labor force participation rate fell to its lowest level in over five years.

The decline in nonfarm payrolls was unexpected, with a consensus forecast predicting a gain of 83,000 jobs. Wage growth also slowed down, with average hourly earnings increasing by just 2 cents. This has sparked debate among analysts about whether the Federal Reserve should raise interest rates to combat inflation.

Some experts argue that the weak jobs report suggests that interest rates will not change next month. However, others believe that the Fed could still raise rates in September due to concerns over inflation. The war with Iran and transport blockades have contributed to surging fuel prices, which may be a major factor in the stagnant economy.