The market is now almost certain that the U.S. Federal Reserve will not raise interest rates in September, while two other meetings in November and December also have more than 50% probability that the central bank will maintain the rate at 5.25-5.50%.
The odds for the U.S. central bank raising interest rates in September jumped from 80% a week ago to 93% last Friday after the statistics bureau reported rising unemployment rate in the world’s largest economy.
The U.S. reported higher nonfarm payrolls last Friday, which showed an unemployment rate rising to 3.8% in August, its highest level in more than a year. The data was also above economists expectations for the payrolls to remain at 3.5%.
Meanwhile, average hourly earnings rose 4.3% from last year and also slightly below expectations of 4.4% rise by economists polled by Dow Jones.
Payrolls in August showed faster-than-expected growing pace with 187,000 being added for the month.
The Bank of America wrote in its note that job openings and unemployed peaking are a strong sign that the Fed is done.
The odds for the Fed to maintain rates at the current level in November rose to 63.5% from 44.5% a week before. The probability at the December’s meeting also has similar data.
Meanwhile, the market gives the best odds for an interest rate cut to begin in May 2024 with a 37.5% chance that rose from 30% a week prior.
