The Federal Reserve and financial markets don’t always see eye to eye.
For most of 2015, Fed Chair Janet Yellen has stressed her confidence that the U.S. economy would improve enough to start raising interest rates before the year’s end. But with inflation tame and the falling unemployment rate not sparking wage gains that might lead to faster inflation, the market has been skeptical.
All that changed Friday, when a surprisingly strong jobs report hinted at the sort of wage growth that the American economy has been waiting for for years. According to data on fed funds future contracts compiled by the CME group, the futures market now thinks there’s a 70% chance of the Fed hiking rates in December, up 20 percentage points from Thursday.