Fed rate hike bets rise as US job gains beat expectations

**Market Expectations for Fed Rate Hike Rise Following Strong Jobs Report**

**WASHINGTON, D.C.** – Expectations for an interest-rate increase at the Federal Reserve’s September meeting have risen following a stronger-than-expected U.S. jobs report for August.

According to the report, employers added 162,000 jobs in August, nearly triple the figure anticipated by economists. Following the release, short-term interest-rate futures indicated a 62 percent probability of a rate hike this month, an increase from approximately 55 percent prior to the data.

The Federal Reserve is scheduled to meet on September 15 and 16. The decision is expected to be heavily influenced by upcoming inflation reports due next week. Fed Chair Kevin Warsh stated last week that he requires clear evidence that inflation is moving toward the central bank’s two percent target. Inflation has remained above that target for five and a half years.

**Political Pressure and Trade Policy**
President Donald Trump responded to the jobs report by renewing his calls for the Federal Reserve to lower interest rates. In a post on Truth Social, the President urged the Fed to “get smart” and argued that high interest rates place the United States at an “unfair disadvantage.”

President Trump also threatened to halt trade with countries that maintain a trade deficit with the United States. His administration has previously imposed tariffs that have contributed to price pressures, which have been further impacted by a boom in AI-related investment and an escalation in the U.S.-Iran conflict. These factors have contributed to rising long-term U.S. Treasury yields and increased government borrowing costs.

**Labor Market Data**
The August report indicated a rise in labor force participation to 61.6 percent, as 300,000 individuals entered the workforce. The unemployment rate remained steady at 4.1 percent, while the unemployment rate for Black Americans fell to six percent. Hourly earnings growth held at 3.1 percent, a rate consistent with the Fed’s inflation target.

**Economic Outlook**
Market analysts are now focused on consumer price data scheduled for release on September 11.

Krishna Guha of Evercore ISI noted that the President’s pressure on the Fed complicates the environment for Chair Warsh, though he observed that Warsh maintained a hawkish stance at the Jackson Hole symposium.

Fed Governor Christopher Waller indicated on September 3 that he would support maintaining rates at 3.50 percent to 3.75 percent if upcoming inflation data, including the producer price index, show that price pressures are moderating. Conversely, Nationwide Chief Economist Kathy Bostjancic stated that the strong employment report supports further rate hikes, projecting two 25-basis-point increases by the end of the year, which would bring the fed funds rate to a range of 4.00 to 4.25 percent.

Article and image source: iranherald.com