Investors now see a 65% chance the Federal Reserve holds rates steady in September following weaker-than-expected employment figures.
U.S. job losses in July have sharply reduced expectations for a Federal Reserve rate hike in September. Prediction markets now assign a 65% probability to the Fed maintaining current rates, up from 50% before the jobs report was released.
Prior to the data, markets were nearly evenly split on a hike or hold, with hike odds at 58% after the Fed’s late-July meeting. CME’s FedWatch tool also reflects this shift, showing a 60% chance of steady rates, up from 45% on Thursday and 33% a week ago.
The report triggered a rally in stocks and a drop in Treasury yields as traders adjusted to a potentially softer monetary policy path. Fed officials had previously debated rate hikes amid rising energy prices, but weakening labor data may reduce the urgency for further tightening.