July Job Losses Undermine Fed’s September Rate Hike Outlook

The July 2026 jobs report dramatically reduced the odds of a Fed rate hike in September.

Surprising Outcomes of the Jobs Report

The U.S. labor market recorded an unexpected loss of jobs in July, reshaping market expectations for a rate increase.

■65% probability that the Fed will keep rates steady, according to Kalshi predictions.

■Prior forecasts hovered around a 50%-50% split, with a 58% chance of a hike at the end of July.

■CME’s FedWatch tool now shows a 60% chance of a steady rate, up from just 33% a week earlier.

Market Reactions and Forecast Shift

Following the report, Treasury yields fell and equities rose as investors priced in a new rate trajectory.

■The hike probability jumped from 45% pre‑report to 65% post‑report.

■A 75% chance of a hike by December remains strong.

■An 55% probability of an October hike persists.

Fed’s Forward‑Looking Strategic Considerations

While some Fed members continue to push for hikes amid rising energy prices and Middle‑East tensions, the weakening labor market may curb that stance.

■Three members dissented at the July FOMC meeting, voting for a rate increase.

■Employment growth was mixed in 2025 but demonstrated resilience in 2026.

Upcoming Inflation Data and Risks

Investors now focus on July inflation numbers, with the CPI slated for release on August 12 to cement the Fed’s decision.

■June saw the biggest month‑over‑month drop in inflation in six years.

■July energy prices rose amid renewed Middle‑East tensions.

Expert Note (Gökberk Uçar): A softer labor market raises the likelihood that the Fed will postpone a rate hike. However, if inflation comes in hotter than expected, it could force a more hawkish stance. In air freight and logistics, lower financing costs may ease shipping rates slightly, but inflationary pressure could offset those gains.