Fed likely to raise rates despite weaker July jobs data

A recent government release revealed a loss of 23,000 jobs in July, the first downturn in payrolls since February, while the unemployment rate edged down to 4.1%. Despite this setback, Federal Reserve Chairman Kevin Warsh is expected to keep the focus on inflation, which ran at 3.7% in June, well above the Fed’s 2% goal. Economists such as Jai Kedia and Ryan Young note that the Fed’s dual mandate may tilt toward price stability, making a rate hike before year-end likely.

Bond markets show roughly even odds on a September hike, but futures data suggest an over-80% chance of at least one increase this year. Some Fed members previously dissented for a hike, and analysts say even a further negative jobs report would not necessarily halt the policy tightening.