Chance of September hike ‘50-50’ as US adds 173k jobs

Chance of September hike ‘50-50’ as US adds 173k jobs

The August employment report was a mixed bag on Friday, leading economists baffled as to whether the US Federal Reserve will raise interest rates at the September meeting.

Some 173,000 jobs were created in August, slightly short of the 217,000 forecast. Unemployment fell to a seven-year low of 5.1 per cent, from 5.3 per cent. However, this was partially due to a 41,000 decline in the labour force last month.

All eyes have been on the jobs report as economists and investors have been torn whether the stage will be set for a rate rise in September.

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Paul Ashworth, chief US economist as Capital Economics, said: “As far as we’re concerned, the September meeting is a 50-50 toss-up.”

Mr Ashworth added that even if the Fed does not hike rates in September, “it won’t leave rates at near-zero for much longer given that it either has (or is close to ) fulfilling the full employment part of its dual mandate.”

Markets took the view that the report indicated a greater chance of a September hike, with the US dollar strengthening. Investors began to move from short-dated Treasuries, which are the most sensitive to monetary policy changes.