As Wall Street shifts expectations towards a Fed rate hike, the White House turns up the pressure on Warsh's central bank
Surprisingly healthy employment data has tipped expectations for a rate hike at the Federal Open Market Committee’s (FOMC) meeting higher this week, with interest rate traders now placing the likelihood at 58.4%.
TL;DR
- Traders now anticipate a 58.4% likelihood of a 25 basis point rate hike at the FOMC meeting, up from previous expectations.
- Strong August employment data, showing 162,000 jobs added and an unchanged unemployment rate of 4.1%, is driving these expectations.
- Inflation remains above the Fed's 2% target, with supply-side issues expected to keep it elevated.
- President Trump is actively pushing for lower interest rates, citing economic disadvantage and threatening trade actions against countries with which the U.S. has a trade deficit.
- Analysts suggest the reason behind a rate hike is more significant than the hike itself, with a hike responding to economic strength differing from one responding to inflation concerns.
- Previous Treasury buybacks by Secretary Scott Bessent could be undermined if yields rise significantly.