Odds the Fed hikes in September tumble following big July jobs miss

The U.S. economy surprisingly shed jobs in July, and it’s leading investors to think that an interest rate hike by the Federal Reserve in September is increasingly unlikely. 

After the jobs report was revealed on Friday morning, odds on prediction market platform Kalshi that the central bank holds rates steady at its meeting next month jumped to 65%. Before the report, odds were about 50-50 for a hike or maintaining the status quo, and just after the Fed’s last meeting at the end of July odds of a hike were at almost 58%. 

On CME’s FedWatch tool, odds that the Fed will maintain rates are now at 60%, based on trading in Fed funds futures. On Thursday, those chances were at 45%, and a week ago they were just one-in-three. 

The weaker-than-expected jobs report sent Treasury yields lower and stocks higher, as investors priced in the new outlook for the rate path. 

If the labor market is weakening, that may change how the central bank thinks about rate hikes, which some members of the Fed have called for amid higher energy prices due to the U.S.-Iran war. At the bank’s July meeting, three members of the Federal Open Market Committee dissented, arguing the bank should have raised interest rates rather than held them steady. 

However, those calls have come after the labor market showed resiliency in 2026 with consistent job growth, after a more mixed picture in 2025. If the job market is showcasing weakness, raising interest rates to slow down the economy may be viewed as more risky. 

Investors’ eyes will now be on what the inflation picture in July looked like, and the Consumer Price Index for the month is set to be released next week on Aug. 12. In June, prices posted their biggest month-over-month fall in six years as energy prices fell, though oil rose in July amid renewed tensions in the Middle East. 

“Today’s weak payrolls print may ease the pressure on the Fed to raise rates at its September meeting, but next week’s inflation data will still likely be the deciding factor,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “If those numbers come in hotter than expected, a cooler labor market may not be enough to quiet the calls for hikes inside the Fed.”

And rate hikes this year still aren’t out of the question. Even after the report, CME’s FedWatch tool still sees a 55% chance of a hike in October, and an almost 75% chance in December. 

— CNBC’s Sean Conlon contributed reporting

Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.