The Federal Reserve’s next move on interest rates is still uncertain, with traders split on whether the central bank will raise rates or hold them steady at its meeting next month. The odds of a rate hike in September are near 50%, while the odds of keeping rates steady are also near 50%, according to CME FedWatch, a real-time forecasting tool.
Uncertainty Surrounds Fed Decision
Volatile job numbers, stubborn inflation, and changes to the Fed’s communications style are all contributing to the uncertainty in markets. The recent employment report showed the US economy lost 23,000 jobs in July, which has moved the odds in favor of holding rates steady. However, the upcoming inflation report could change the odds again.
Consensus estimates are for 3.4% annual headline inflation in July, down slightly from 3.5% in June. Any surprise of hotter-than-expected inflation could prompt traders to ramp up bets on a rate hike in September. The Fed’s benchmark interest rate is significant for markets because it can impact the health of the economy, as well as the prices and expected value of bonds, stocks, and the dollar.
The war with Iran continues to add to the uncertainty, with global oil prices rebounding in July to $100 per barrel before falling in recent weeks to around $80 per barrel. A weaker-than-expected jobs report has dampened the argument for rate hikes in September.
Original reporting: KEYT (Ventura/Santa Barbara) — read the source article.
