#美联储加息是否已成定局 is highly likely, but not 100% certain on the board
• CME Fed watch: The market is pricing a 25bp rate hike with a 92% probability, while keeping rates unchanged has only a 7–8% chance. If there is a hike, the interest-rate range would rise from 3.50–3.75% to 3.75–4.00%.
• The key reasons behind the rate-hike expectations:
1. August U.S. CPI month-over-month was 0.4%, and core CPI MoM was 0.3%, both above the expected 0.2%. Inflation has rebounded again, and is still far from the 2% target.
2. Middle East tensions have pushed up crude oil. Brent crude has broken above $108, and the market worries that energy price increases could filter through to overall prices, creating a second round of inflation pressure.
3. Job market resilience remains. In August, nonfarm payrolls were 162,000, unemployment was 4.1%, and the economy can still withstand further tightening of monetary policy.
However, there is still a low-probability scenario where there is no hike: there may be dovish officials within the committee who are concerned that an excessive hike could push the economy into recession. They could choose to stand pat in September, but with hawkish messaging that preserves the option to hike in October/December.
Will the next black swan happen at 2:00 a.m. tonight?
• CME Fed watch: The market is pricing a 25bp rate hike with a 92% probability, while keeping rates unchanged has only a 7–8% chance. If there is a hike, the interest-rate range would rise from 3.50–3.75% to 3.75–4.00%.
• The key reasons behind the rate-hike expectations:
1. August U.S. CPI month-over-month was 0.4%, and core CPI MoM was 0.3%, both above the expected 0.2%. Inflation has rebounded again, and is still far from the 2% target.
2. Middle East tensions have pushed up crude oil. Brent crude has broken above $108, and the market worries that energy price increases could filter through to overall prices, creating a second round of inflation pressure.
3. Job market resilience remains. In August, nonfarm payrolls were 162,000, unemployment was 4.1%, and the economy can still withstand further tightening of monetary policy.
However, there is still a low-probability scenario where there is no hike: there may be dovish officials within the committee who are concerned that an excessive hike could push the economy into recession. They could choose to stand pat in September, but with hawkish messaging that preserves the option to hike in October/December.
Will the next black swan happen at 2:00 a.m. tonight?