US Interest Rates Take Wild Ride on Data Rollercoaster

The US interest rate landscape has been marked by volatility in recent days, with rates experiencing a rollercoaster of changes due to various economic data releases.

Last Thursday, dovish comments from Federal Reserve Governor Michael Waller sent rates lower. He suggested that the Fed may keep rates on hold, citing some signs of disinflation, but also pointed out the importance of upcoming data releases, including the CPI release next week.

However, a stronger-than-expected ISM services report then pulled rates higher again, although not all the way back. The report showed higher-than-expected new orders and prices paid, alongside a weaker employment component, which aligns with the anticipated impact of AI.

Rates are likely to continue being jolted around by data releases, particularly this Friday's jobs data, which will help define the next FOMC decision. According to ING economists, it now seems that a rate hike is more likely unless the August jobs and CPI data justify a pause. They suggest that it would require a jobs figure below 25k, possibly even net job losses, with then a core CPI reading below 0.2% month-on-month, to prevent or delay a hike.