Wall Street sees Fed rate hike as jobs report beats forecasts

September 5, 2026 at 07:22 PM2 min

This digest was compiled by AI from multiple sources — links to the originals are below.

The U.S. economy added 162,000 jobs last month, beating forecasts and pushing Wall Street to expect a Federal Reserve rate hike. Fed Governor Christopher Waller signaled support for holding rates steady if next week's inflation report shows easing prices. Polymarket bettors price a 53% chance of a hike at the Sept. 15-16 meeting.

Key Facts

The U.S. economy added 162,000 jobs last month, exceeding economists' expectations.
Macquarie analysts moved their rate-hike expectation from December to September, with a second hike due in Q1 2027.
Polymarket bettors price a 53% chance of a rate hike versus 48% for a hold at the Sept. 15-16 meeting.
Fed Governor Christopher Waller signaled support for keeping rates steady if next week's inflation report shows easing prices.

Jobs Report and Market Reaction

The U.S. economy added 162,000 jobs last month, blowing past economists' expectations. Wall Street sees the blowout jobs report and spiking Treasury yields as another sign that the Fed will have to hike rates to clamp down on inflation. Joe Brusuelas, RSM chief economist, said the Fed is "a little bit behind the curve" and will need to hike rates to reinforce credibility. The Trump administration has been pushing hard for lower rates, with the president threatening a trade embargo if they don't.

Fed Signals and Rate Expectations

Fed Governor Christopher Waller signaled support for keeping rates steady if next week's inflation report shows easing prices. R.J. Gallo, Federated Hermes chief investment officer for global fixed income, said he is "leaning into the direction of a Fed hike." Macquarie analysts moved their rate-hike expectation from December to September, with a second one due in the first quarter of 2027. Polymarket bettors have priced in a 53% chance of a rate hike versus a 48% chance of a rate hold at the Sept. 15-16 meeting.

Long-End Yield Pressures

Rising inflation from higher oil prices, record-high debt, and increasing auction sizes have led investors to demand a higher term premium on the debt they buy. A recent U.S. Treasury announcement to increase bond buybacks eased yields for about a day before they rose again. An intervention to help Japan's currency, in exchange for not selling its bonds, also did little to stem a rise in the long end of the curve. Gallo said, "The position of the United States as a borrower is just not quite what it was."