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Strong US jobs have pushed September Fed hike odds above 60%

BNY Markets expects the Fed to lift rates two to three times in coming months, potentially moving policy above the roughly 4% neutral rate before cuts later if inflation eases.

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BNY Markets strategist John Velis says a strong US jobs report has pushed market expectations for a September Federal Reserve rate hike back above 60%, reversing some of the decline tied to Governor Christopher Waller’s more cautious comments, according to FXStreet.

Velis said the Fed could raise rates two or three times over the coming months, which would potentially take policy above the roughly 4% neutral rate as inflation risks and tighter financial conditions weigh on growth.

He added that while rates may later decline if inflation eases, the question is whether further tightening needs to be meaningfully restrictive beyond that neutral level, given estimates from instruments tracking the equilibrium neutral rate just above 4%.

The note also points to ongoing market positioning around the US dollar, with FXStreet citing how hawkish Fed expectations are competing with other drivers in USD pairs during the session.

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