Even the most committed dove would struggle to find much in the August employment report to justify keeping interest rates unchanged, with the surge in payrolls driven by strength across the non-health private sectors and the unemployment rate unchanged despite a big rebound in participation. The prospect for a rate hike this month still depends much more on the August CPI and PPI data next week, but the strength in the labour market means we’ll only need to see data that are consistent with a modestly above-target-consistent gain in the core PCE deflator to shift our forecast back to a September hike.
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