Markets price a two-thirds chance of a September rate increase as Fed Chair stresses data dependency on inflation and jobs reports.
The Federal Reserve left interest rates unchanged at its July meeting, maintaining its data-dependent approach. Investors now see a 66% probability of a rate hike in September, contingent on upcoming economic data releases.
Recent labor market trends show moderation, with payroll growth slowing and household sentiment indicating softer conditions than the 4.2% unemployment rate suggests. Inflation prints, particularly core CPI, will be critical in shaping expectations for further tightening.
Key reports on CPI and payrolls are due just before the September meeting, leaving the decision finely balanced. Geopolitical risks, including developments in the Middle East, could also influence the Fed’s outlook.