Last week, we addressed the possibility of Jerome Powell maintaining a consistent stance in his Jackson Hole speech, underscoring the importance of staying on the current trajectory. In large part, this is exactly what transpired. Powell went a small step further by specifically mentioning to raise rates if the situation demands. The markets took him at his word and are now increasing the probability of a 25 basis points hike at the November meeting. The rationale behind a November adjustment stems from several Federal Reserve governors adopting a hawkish stance on inflation during their speeches while also advocating for a cautious "wait and see" approach with regard to rate hikes.
This juxtaposition has signaled to the markets that the Fed is leaning towards a pause at September’s meeting. The notion of a decelerating economy, mentioned in our last Market Update, has been supported by recent indicators. However, the August Nonfarm Payrolls (NFP) report released this morning shows mixed data. Many predicted the report to show 170,000 new jobs created this month, but the data came in higher at 187,000. Conversely, unemployment rose to 3.8% in August from 3.5% in July.