However, a softer-than-expected jobs report seemed to pump the brakes on an October increase. The Fed is widely expected to leave rates alone this week, and one economist says patience is the likelier path.
Sam Williamson (pictured top), senior economist at First American, said the Fed is more likely to hold off than act now.
“Election day may command the headlines, but the economic data will ultimately drive the Fed’s next move,” Williamson told Mortgage Professional America. “And in September, the data painted a mixed picture, with inflation coming in hotter than expected and job growth surprising to the downside. While an October rate hike remains a possibility, the Fed may prefer to proceed cautiously and wait until December.”
Why a pause looks likely
The jobs numbers in September spun the betting markets from a likely rate hike to a hold. As of Monday morning, CME FedWatch showed a 90.6% chance of a hold and a 9.4% chance of a quarter-point increase, compared with a 64.2% chance of an increase on Sept. 25.
In a LinkedIn poll after the last increase, some brokers said the Fed should have gone with a 50-basis-point bump. Williamson sees merit in the more cautious option.
