Friday Jobs Report Fails to Lift Fed Rate Hike Bets

Bitcoin slipped on Friday while U.S. Treasury yields moved higher, but the market’s hawkish response appears stronger than warranted given that expectations for a Federal Reserve rate hike have barely changed.

Friday’s stronger-than-expected jobs report has fueled renewed speculation that the Fed could raise interest rates later this month. However, market pricing tells a less decisive story.

The probability implied by futures markets remains relatively moderate, suggesting traders have not significantly changed their view from a week ago, before the latest employment figures were released.

According to the CME FedWatch Tool, markets currently see a 58% chance of the Fed lifting its benchmark rate by 25 basis points to a 3.75%-4% target range.

That estimate is broadly in line with expectations from the previous week, when markets were still digesting Fed Chief Kevin Warsh’s hawkish remarks at Jackson Hole.

The takeaway is that investors with money directly exposed to the outcome are not materially increasing their bets on a rate hike. While social media discussions and a growing number of analysts have adopted a more hawkish stance, market positioning itself remains relatively steady.

Friday’s price action initially suggested a much stronger shift in expectations. Bitcoin dropped from around $81,300 to $78,700 within a few hours, while the two-year Treasury yield, which is particularly sensitive to interest-rate expectations, climbed from 4.36% to 4.42%.

Yet those moves appear disproportionate when compared with the limited change in the market’s rate-hike pricing.

For now, the September rate increase remains a possibility rather than a foregone conclusion. That outlook could change quickly if the Sept. 11 inflation report comes in weaker than economists expect.

Some analysts have also cautioned that raising rates during an oil-price shock could be counterproductive and potentially cause more economic damage than benefit.

The Federal Reserve is scheduled to announce its next interest-rate decision on Sept. 16.