BANK OF AMERICA: Nonfarm Payrolls Are Just a Warm-Up for the Fed Meeting

Bond market volatility this week has changed how investors will read the next batch of economic data. According to Sina Finance, Bank of America said the August jobs report due on Friday is unlikely to be the decisive factor for whether the Federal Reserve raises rates at its September 15-16 meeting, while the Consumer Price Index is the key data point for judging whether a rate hike will happen. The bank's analysts said a significantly weaker jobs report would reduce the odds of a rate hike, but they maintained their view that the Fed will raise rates in September. August CPI is due on September 11, and the market expects inflation to rise 3.4% year over year, unchanged from July. The article also said CPI could come in above expectations because pressure from the U.S.-Iran conflict has not eased. The piece said Fed Chair Kevin Warsh's remarks at Jackson Hole last week further increased the weight investors place on CPI. It added that unless the jobs data is much weaker than expected, Friday's report is unlikely to settle the policy split at the Federal Open Market Committee meeting. Bank of America said markets are highly sensitive to rate hikes, and if jobs data weakens and lowers the odds of a hike, the reaction could be stronger than usual. Even so, the bank said uncertainty will likely remain until the inflation data is released, with inflation still the Fed's top focus.