Fed September Rate Hike Odds Slip After Weak July Jobs Report

Traders have sharply reduced the likelihood of a Federal Reserve interest-rate increase at next month's policy meeting, following a surprise drop in U.S. nonfarm payrolls for July.

According to LSEG data, interest-rate futures now price in just a 43.9% probability of a rate hike in September, a significant fall from the 57% chance seen before the jobs data was released. The shift reflects growing market conviction that the central bank will hold rates steady next month, with the odds of no change rising to 60.4% from 43.2% prior to the report.

The unexpected decline in payrolls has injected fresh uncertainty into the Fed's policy path, prompting investors to reassess the timing of any potential tightening. The futures market's reaction underscores how sensitive rate expectations have become to labor-market signals, as policymakers weigh inflation pressures against signs of cooling employment.

With the September meeting now less than six weeks away, the data will likely feature prominently in the Fed's deliberations. For now, the market's verdict is clear: a rate move next month is no longer the base case.