The Federal Reserve will announce its next interest-rate decision at its September 15-16 meeting, with markets increasingly focused on the possibility of a rate hike. After Fed chair Kevin Warsh’s speech at Jackson Hole, The chance of a September rate hike rose from about 33% to 66%, according to market pricing. It was later around 64%, while economist Steve Hanke put his own estimate at about 80%.
Kalshi traders see a 55% chance of a 25-basis-point Fed rate hike in September, while the chance of rates staying unchanged is 46%. Only 2% of traders expect a hike of more than 25 basis points
Markets are watching U.S. jobs data and Fed policy expectations. Geopolitical tensions and oil prices are also keeping risk appetite fragile.
Jobs Data Could Decide the Fed’s Next Move
Warsh’s case for keeping rates high or raising them depends partly on the strength of the U.S. labor market. At Jackson Hole, he pointed to 4.1% unemployment and near-record-low jobless claims as signs that the Fed still has room to keep rates high or raise them without hurting workers.
This week’s labor reports will put that view to the test. The JOLTS report will show whether companies are still hiring or starting to pull back. The ADP report will provide an early reading on private payroll growth.
The key report comes Friday, when the nonfarm payrolls and unemployment figures are released. Strong numbers could support the case for a September rate hike. Weak numbers could make that case harder to defend.
The Fed will also receive PPI and CPI data the following week, shortly before its meeting.
Steve Hanke Sees an 80% Chance of a Hike
Steve Hanke expects a higher chance of a September rate increase than the broader market.
The CME FedWatch showed the probability of a hike rising from about 33% to 70% after Warsh’s speech. Hanke said he sees the chance at approximately 80%.
Three members of the Federal Open Market Committee had already voted for a rate increase at the previous meeting. Hanke expects Warsh could join them and potentially influence other members. He said his view could change if economic data suddenly became very weak.
However, Hanke argued that strong monetary growth and nominal GDP conditions make such a slowdown less likely.
The Case Against a September Rate Hike
A market analysis from Wellington-Altus says that another rate hike may not be necessary.
The analysis says renewed price pressure could be the result of a supply shock rather than strong demand. Supply shocks can change prices without creating a lasting inflation problem. The argument is that higher costs would need to spread into wages, wider prices and inflation expectations for a sustained inflation cycle to develop.
The analysis also points to softer employment conditions and pressure in interest-rate-sensitive sectors such as housing, construction and consumer durables.
Higher rates could make adjustments in supply, investment and productive capacity more difficult. Two-year inflation breakevens also remain well anchored.
Tom Lee Sees a Chance for a September Rally
Tom Lee, co-founder of Fundstrat and chairman of Bitmine Immersion Technologies, has changed his view on September. Lee had previously expected the market to see a correction of about 10% this month.
He now believes concerns about the Fed, AI spending and seasonal weakness could instead help drive a rally.
In an interview with CNBC, Lee said the S&P 500 could surprise to the upside if the Fed leaves rates unchanged.
He sees the September 15-16 Fed meeting as a possible turning point.
“If the Fed doesn’t hike, which is our base case, I think actually the markets could rally very strongly,” Lee said.
Lee also said Bitcoin’s recent rally could be the beginning of a much larger move.
Crypto Market Impact
Bitcoin price today is currently around $77,000, leaving the market between two important levels. The key support is $76,000, while resistance is around $80,000. A move above $80,000 with strong volume could give the altcoin market more room to recover.
A break below $76,000 would weaken the current setup and could lead traders to wait for a new support zone. With Bitcoin moving in a choppy range, the focus remains on whether it can reclaim $80,000 or loses $76,000.
Ethereum is trading around $2,400. The key levels are $2,400 support and $2,500 resistance.
Solana is around $100, with $100 acting as support and $110 as resistance.
The direction of Bitcoin could influence both assets. A stronger Bitcoin move above $80,000 could give altcoins more room to recover.
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