The Fed's probability of a 25-base point increase in September has risen to 57 per cent

ON 30 AUGUST, ACCORDING TO THE CME FEDERAL RESERVE WATCH, THE FED'S PROBABILITY OF MAINTAINING INTEREST RATES IN SEPTEMBER WAS 43 PER CENT, WITH A RATE INCREASE OF 57 PER CENT FOR 25 BASIS POINTS. PREVIOUSLY, WALSH'S SPEECH AT JACKSON HALL FRIDAY NIGHT WAS MORE HAWK THAN THE MARKET EXPECTED. WALSH SAYS THAT IF POLICYMAKERS ARE NOT CONVINCED THAT INFLATION IS FALLING BACK TO 2 PER CENT "AT A CLEAR AND FAST ENOUGH RATE," THE FED "HAD WORK TO DO." THIS SUGGESTS THAT IF PRICE PRESSURES DO NOT IMPROVE, THE FED COULD RAISE INTEREST RATES NEXT. A NON-FARM EMPLOYMENT REPORT AND A CPI INFLATION REPORT WILL ALSO BE AVAILABLE PRIOR TO THE SEPTEMBER FED MEETING, WITH SOME SECONDARY DATA RELEASE. GIVEN THAT RECENT UNITED STATES EMPLOYMENT REPORTS HAVE FALLEN SHORT OF EXPECTATIONS AND THAT THERE ARE SIGNIFICANT GAPS, ANY FURTHER SIGN OF WEAKNESS COULD SERIOUSLY WEAKEN THE MARKET ' S EXPECTATIONS OF A SEPTEMBER HIKE。