Friday’s unexpectedly strong employment report showing the U.S. economy added 528,000 jobs in July, more than twice the consensus forecast of 250,000, is likely to keep pressure on the Federal Reserve (Fed) to maintain a more rapid pace of monetary tightening. Short-term Treasury yields moved sharply higher following the jobs data with the bond market now pricing in greater odds for a third consecutive 75-basis-point rate hike at the upcoming September Fed meeting.
Fed policymakers will be looking for better news this week on the inflation front with the Consumer Price Index release on Wednesday and the Producer Price Index on Thursday. Both numbers are expected to decline slightly on a year-over-year basis, likely signaling peak inflation levels for both if energy prices remain well behaved. Friday’s University of Michigan consumer sentiment reading will also be closely watched coming off a near-record low print in July.
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