September Fed rate hike a razor thin decision

The Fed rate hikes are coming soon; the only uncertainty is the exact timing of lift-off. Even before the recent increased worries about China's economic slowdown and turmoil in financial markets the Fed's rate decision at the next FOMC meeting on 16-17 September seemed as a rather close call. But the heightened uncertainty about China and the fragile market sentiment might just have tilted the balance in the dovish camp's favour. Therefore, the  first rate hike is expected in December, says Nordea Bank. 

Fed's Vice Chair Fischer hinted that an increase in August nonfarm payrolls close to the 235k average gain from May through July would be consistent with "some" further labour market improvement - a prerequisite for the Fed to start lifting rates, notes Nordea Bank. 

"Due to technical reasons a 190k rise is expected in August payrolls on Friday, below the recent trend. Thus, especially August payrolls have tended to be underreported initially throughout the recovery. Over the past five years, the initially August payrolls have been revised up by 79k on average over the following months; see our preview in Week Ahead", says Nordea Bank in a report on Monday.