The Fed's decision to keep rates on hold at its mid-September meeting had relatively little to do with the strength of the labor market, says Credit Suisse.
"While the statement expressed the continued desire for "some further improvement in the labor market," the unemployment rate is near the Fed's longer-run 4.9%.
Credit Suisse economists expect another relatively steady set of labor market data this Friday, with non-farm payrolls gaining another 195K and wages rising 0.2% m/m.
"In our view, an on or near consensus release should increase the market's assigned probability to a December hike – currently about 40% priced – even if only modestly," CS argues.
"We expect a payrolls surprise to matter more for the market's view on the timing of the first hike, while adjustments to the expected pace of Fed tightening are likely to be more a function of average hourly earnings," CS adds.
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