The futures markets are not expecting the Fed to change monetary policy at this week’s regularly scheduled meeting on July 28-29. The markets will be paying close attention to the statements released during the meeting, and what the FOMC will be saying about rising energy prices due to the war in the Middle East and the effects that is having, and is expected to have, on inflation.
The employment data that was just released allows the Fed to focus on inflation without worrying too much about the effect of a rate increase on labor. Initial jobless claims last week were down to the fewest claims since 1969, when the workforce was less than half of what it is today. Layoffs are low, despite the uncertainty in the economy. However, a war that isn’t resolved quickly that causes energy prices to surge, may eventually force employers to cut jobs to save money.
The general feeling is that rates may rise as soon as at the Fed’s next meeting in September. The probability of a September rate hike rose last week to 82 percent from 53 percent a week earlier.