Fed Rate Hike Odds Increase Following ADP Employment Report

The ADP report released on Wednesday indicated an increase in private sector payrolls for July, along with an upward revision of the previous month’s figures. This prompted traders to marginally raise the likelihood of a rate hike by the Federal Reserve (Fed), though expectations largely remain that the interest rate will stay within the current range of 0.25%-0.50% until well into 2017.

After the report was made public, the probability of an interest rate increase in September rose to 18%, up from 12% in the preceding assessment, according to CME Group’s FedWatch tool. Additionally, the odds for a December rate hike increased to 41.5%, compared to 38.5% before the report was issued.

However, markets are primarily anticipating a rate increase in June 2017, with a probability of 53.6%.

The upcoming official government employment numbers, scheduled for release on Friday, are expected to provide further insights. Analysts predict that the data will reveal job growth of approximately 180,000, while the unemployment rate is anticipated to dip to 4.8% from the previous 4.9%. Meanwhile, wage growth is estimated to increase by 0.2%, following a 0.1% rise observed a month earlier.