Markets see an even chance of a September Fed rate increase despite softer U.S. jobs data as inflation concerns persist.
U.S. markets showed limited reaction to July’s weaker-than-expected payrolls report, with Fed rate hike probabilities remaining close to 50% for next month. Treasury yields dipped only slightly, while the S&P 500 extended record highs on Friday, reflecting cautious optimism amid mixed signals.
July’s jobs data surprised with a slowdown in hiring, though the unemployment rate unexpectedly declined. Consensus forecasts for Wednesday’s CPI report anticipate a slight easing in annual headline and core inflation, though both are expected to remain above 3%. Oil prices above $84 per barrel add to inflationary pressures, complicating the Fed’s policy outlook.
This week’s $125 billion Treasury issuance and renewed political scrutiny of Fed Governor Lisa Cook further cloud the rate path. Markets remain on edge ahead of key inflation data, balancing growth concerns against persistent price risks.