US Fed May Postpone October Rate Hike Due to Labour Market Cooling
Policymakers at the United States Federal Reserve received additional justification on Friday to postpone any further interest rate hikes, as recent government data indicated a more pronounced cooling of the labour market than anticipated. US employers added only 29,000 jobs last month, according to the Labour Department, falling short of the 90,000 that economists had anticipated. August payroll gains experienced a downward revision. The unemployment rate increased to 4.2 percent, up from the previous 4.1 percent.
The Fed increased short-term borrowing costs by a quarter of a percentage point last month in an effort to steer inflation back toward the target of 2 percent. Policymakers indicated that another rate hike is probable by year-end, contingent upon the persistence of inflationary pressures from the Iran war and other shocks, provided the labour market remains resilient. Following the data released on Friday, interest-rate futures contracts indicated a probability of less than one in five for a rate hike at the Federal Reserve’s October meeting, a decrease from the previous assessment of more than one in four. Traders have reduced their expectations for a December rate hike, although the market still assigns it a probability of nearly 90 percent.
Hiring decreased from a revised 133,000 in August, according to the Labour Department’s report. Friday’s jobs report is the final release prior to the November 3 elections, which will ascertain if President Donald Trump’s Republicans retain complete control of Congress. Futures for the S&P 500 and Nasdaq Composite increased following the release of the data, while Treasury yields declined. The yield on the 10-year Treasury was 5.17 percent, a decrease from 5.24 percent the previous day.
