Mohamed El-Erian, chief economic adviser at Allianz, told Bloomberg News on Friday that bond traders underestimate the likelihood that the Federal Reserve will raise interest rates in September after a surge in U.S. hiring bolstered the case for tighter monetary policy.
He has a point.
The Fed is very short-term data driven when it comes to monetary policy and the jobs numbers that they look at are currently very strong. A September rate hike is certainly in play, though, a stock market dip or new numbers out between now and the September 20-21 FOMC policy meeting could somehow spook the Fed and delay a hike.
That said the possibility the Fed is going to cut rates in September is near zero, Remarkably, though, I still see some Austrian-lites claim that the Fed is stuck and will have to cut rates soon. Not going to happen.