Bank of America: Nonfarm Payrolls May Not Be Decisive for September Rate Hike, CPI Remains Key

Bond markets have been fluctuating sharply, with investors closely watching two key U.S. data releases that could influence the Federal Reserve's decision. The August nonfarm payrolls report is due on Friday, followed by the August CPI on September 11. However, Bank of America believes these two data points carry different weight in the Fed's September 15-16 meeting. The bank views the nonfarm payrolls report as an "appetizer," while the CPI is the "main course" that will truly determine whether the Fed raises rates. Analysts at Bank of America stated on Wednesday, "Nonfarm payrolls are unlikely to be the decisive factor for a September rate hike. A significantly weak report could lower the probability of a hike, but the CPI remains the key data to determine whether the Fed delivers a rate increase. We maintain our forecast for a September rate hike." Unless Friday's nonfarm payrolls data show a clear downside surprise, the employment report is unlikely to be the final deciding factor in the September FOMC meeting debate. The bank particularly emphasized that inflation remains the Fed's primary focus at this point.