Citi Research: Employment Data Unlikely to Alter Federal Reserve's October Rate Hike Expectations; September Core CPI Becomes Key
Citigroup Research noted in a September 28 report that the Federal Reserve's policy reaction function has become more sensitive to immediate inflation data and energy prices. The bank anticipates that the upcoming September non-farm payrolls will show an increase of approximately 85,000 jobs, with the unemployment rate rising slightly from 4.1% to 4.2%. This outcome is deemed insufficient to significantly reduce market pricing for a more than 50% chance of a rate hike in October. Citi believes that only extreme scenarios, such as negative non-farm employment or an unemployment rate rising to 4.3%, would prompt the market to re-evaluate the probability of a rate hike. Concurrently, Citi expects core PCE inflation data, to be released this Wednesday, to be significantly revised downwards, but notes that this is already anticipated by the market, limiting its actual impact. Therefore, the ultimate decisive factor for whether a rate hike occurs in October will hinge on the September core CPI reading.
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Disclaimer: This content reflects the author's personal views only and does not constitute investment advice.
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