Weak US Jobs Data Shifts the Fed Outlook

ING's Surprise US Job Weakness Casts Serious Doubt on Fed Rate Hikes argues that July's unexpectedly weak labour market report has significantly reduced the likelihood of further Federal Reserve tightening, although upcoming inflation data remain decisive. 

• U.S. payrolls fell by 23,000 in July, while the previous two months were revised down by 103,000, pointing to a much weaker labour market than previously believed.
• Although the unemployment rate declined to 4.1%, ING argues this reflected a sharp fall in labour-force participation rather than stronger employment, with roughly 250,000 people leaving the workforce. 
• Following the report, markets sharply reduced expectations for a September rate hike. ING expects the Federal Reserve to remain on hold well into 2027, provided inflation continues to ease over the coming months. 

Read the full report for ING's detailed assessment of the U.S. labour market, inflation outlook and implications for Federal Reserve policy.