Despite the hawkish-looking headlines coming out of the Fed, I don’t think a September rate hike is a done deal. The Fed is clearly keeping the option open because inflation remains above target, but it will still have to evaluate the incoming inflation and labor-market data before making a decision. Monetary policy also works with a lag, and if employment continues to weaken, the Fed may decide that holding rates at 3.50%–3.75% is preferable to tightening into a slowing economy. Markets are currently pricing a meaningful probability of a hike, but that probability can change quickly. If upcoming inflation data shows further cooling and the labor market weakens, rate-hike expectations could fall sharply, potentially pushing Treasury yields lower and providing a significant tailwind for growth and AI stocks. The Fed may be talking hawkishly to keep inflation expectations anchored without actually needing to follow through with a hike. The next inflation and jobs reports will matter far more than today’s headlines. What do you think? $SPY$VOO$TLT
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3 Comments
Carolyne Alvarez@cancerfighter1 · 9h
I think there will be a hike but possibly a 0.25% based on what I’ve read. Sept 4th the August jobs report will come out and then the Consumer Price Index inflation release. It’s gone up to 3.4% so far this year which excludes energy and food luckily at 2.5%
Lee @mlj3454 · 9h
No one ever talked about the under employed and people who dropped off unemployment insurance because they couldn't find jobs. How were they included in the unemployment #? Did they use the non-farm payroll to calculate that? I never really believed in unemployment #. Why did the market drop when housing and building permits went up. Beats me...
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