US rate futures cut chances of September rate hike after jobs data

U.S. hiring data for July drove financial markets to lower forecasts for the U.S. central bank raising its interest rate target at September's Federal Open Market Committee meeting, after a week in which several Fed officials made the case for lifting rates to tackle stubborn inflation.

Futures markets put at less than even odds of a rate hike at the next FOMC meeting and are split on where the Fed will end up by the end of the year after data showed the U.S. economy lost 23,000 jobs in July amid a modest decline in the unemployment rate to 4.1% from June's 4.2%, although that shift was driven by the less positive move of workers out of the labor force.

The downward shift in hiring conditions pointed to the possibility that the relative stability of the job market may be more vulnerable than thought.

The rate futures market has now priced in just a 43.9% chance of Fed tightening in September, compared with 57% before the jobs report, LSEG data shows. The probability that the Fed will hold rates next month rose to 60.4% versus 43.2% just before the data release.