FED Rate Hike Odds Climb Ahead of FOMC Meeting in September

The Federal Reserve will announce its next interest-rate decision at its September 15-16 meeting, with markets increasingly focused on the possibility of a rate hike. After Fed chair Kevin Warsh’s speech at Jackson Hole, The chance of a September rate hike rose from about 33% to 66%, according to market pricing. It was later around 64%, while economist Steve Hanke put his own estimate at about 80%.

Kalshi traders see a 55% chance of a 25-basis-point Fed rate hike in September, while the chance of rates staying unchanged is 46%. Only 2% of traders expect a hike of more than 25 basis points

Markets are watching U.S. jobs data and Fed policy expectations. Geopolitical tensions and oil prices are also keeping risk appetite fragile.

Jobs Data Could Decide the Fed’s Next Move

Warsh’s case for keeping rates high or raising them depends partly on the strength of the U.S. labor market. At Jackson Hole, he pointed to 4.1% unemployment and near-record-low jobless claims as signs that the Fed still has room to keep rates high or raise them without hurting workers.

This week’s labor reports will put that view to the test. The JOLTS report will show whether companies are still hiring or starting to pull back. The ADP report will provide an early reading on private payroll growth.