Fed may skip October but pull rate hike trigger in December
TLT•Traders see about a 25% chance of an October rate hike and a high probability of a December increase. September payrolls rose by 29,000, below economists’ 90,000 estimate.
1. October hike less likely
Federal Reserve policymakers were leaning against a second consecutive rate hike in October to assess more economic data, and a weaker-than-expected jobs report left that approach intact. Traders now see about a one-in-four chance of an October increase.
2. Jobs and inflation data
U.S. employers added 29,000 jobs in September, below the 90,000 economists had expected, while August payroll gains were revised down. Unemployment rose to 4.2% from 4.1%, driven by more people entering the workforce, and wage growth slowed. Inflation measured by the Fed’s preferred gauge was 3.4% in August, above its 2% goal.
3. December remains in view
Chicago Fed President Austan Goolsbee said there was room for either a rate increase or a pause, adding that inflation remained the problem. Traders see an overwhelmingly high probability of a December increase, though upcoming inflation data and other developments could influence the Fed’s next decision.
