September Rate Hike Chances Plunge as US Jobs Data Disappoints

US rate futures have downgraded expectations of a September interest rate hike by the Federal Reserve after July's jobs data was released. The data showed the US economy lost 23,000 jobs in July, with the unemployment rate declining to 4.1% from June's 4.2%. However, this decrease was driven by workers leaving the labor force rather than an increase in employment.

The rate futures market has now priced in just a 43.9% chance of Fed tightening in September, compared with 57% before the jobs report. The probability that the Fed will hold rates next month rose to 60.4%, versus 43.2% just before the data release.

Some analysts are cautioning that this may not be a definitive change in the Fed's stance on interest rates, citing recent comments from officials who expressed strong interest in a rate hike or tighter policy. Federal Reserve Bank of Richmond President Thomas Barkin said the July report was consistent with his view of a stable labor market.

Citibank analysts are taking a contrarian view, predicting that the next move is likely to be a cut in interest rates rather than a hike, citing softer labor market data and upcoming cooler inflation as reasons for their forecast.