Before the August non-farm payrolls report was released, the September interest rate meeting faced a dilemma: weak or even negative non-farm payrolls, coupled with persistently high CPI. High inflation would justify a rate hike, but raising rates after two consecutive months of weak non-farm payrolls (especially consecutive negative growth) would be highly controversial.
With the market and top investment banks pessimistic, the unexpected double-digit growth in August's non-farm payrolls removed a major obstacle to a September rate hike. As Fed Governor Waller stated yesterday, "Whether or not to raise rates in September depends on the August CPI." The non-farm payrolls report no longer influences the rate hike decision; the September CPI data is practically the deciding factor.
