August's jobs report came in hot enough to sharpen Wall Street's view: the Federal Reserve now looks more likely to raise rates at the September FOMC meeting. CME FedWatch shows markets pricing in a 58.4% chance of a 25-basis-point hike, taking the fed funds rate to 3.75%-4%.
The U.S. economy added 162,000 nonfarm payrolls in August, and the unemployment rate stayed at 4.1%. Inflation is still running above the Fed's 2% target. And there are fresh worries that supply shocks tied to Middle East tensions, higher oil prices, and tariffs could lift prices even more. Macquarie, Bank of America, and UBS have all raised their rate hike calls.
At the same time, the Trump administration is still leaning on the Federal Reserve to cut interest rates. President Trump recently said the Fed should lower rates, saying high rates are putting the U.S. at a disadvantage. Vice President Vance said lower rates would help housing affordability in the country. But as the market moves toward a rate hike, Fed Chair Warsh is stuck between White House demands for cuts and traders betting the other way.