On September 21, the Fed is gonna do it. They’re gonna hike rates, say a few bold economists.

The US economy is adding jobs at a rate that’s “just enough” for most members of the Fed’s Federal Open Market Committee (FOMC) to vote for a rate hike this month, Goldman Sachs’ Jan Hatzius argued.

During the global financial crisis, the Federal Reserve loosened monetary policy and lowered interest rates aggressively in its effort to stimulate the tumbling economy. By December 2008, the Fed had cut its benchmark rate to a target range of 0-0.25%, effectively lending money for free. After watching the economy grow for seven years, the Fed lifted its target range to 0.25%-0.50% in December 2015.

Since December, the Fed has been on hold. And the world of policymakers, economists and investors have been left to speculate what the Fed may or may not be thinking.

But the jobs report was disappointing

For most traders and economists, the odds of a September rate hike actually fell after Friday’s disappointing US jobs report. According to futures market data tracked by Bloomberg, the probability of the Fed hiking rates at its Sept. 21 meeting fell to just 22% from 34% before the jobs report.

The US economy added just 151,000 payrolls in August, which was less than the 180,000 expected by economists. This was down from the 275,000 added in July.

“The soft August employment report seemed to take the September 20-21 meeting off the table and the Fed probably does not want to hike at its November 1-2 meeting, as it comes right on top of the election, but as long as job growth doesn’t slow further, the Fed should be ready to pull the trigger on December 14,” Bank of America Merrill Lynch’s Ethan Harris said. His language and rationale reflects the current consensus.

One month’s disappointment doesn’t reflect the trend

Sure, August’s pace of job gains were down from July. And notably, they fell below expectations. But ultimately, the only folks who should be disappointed by numbers are the economists who set those expectations.

“Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months,” Federal Reserve Chair Janet Yellen said at last month’s Kansas City Fed Economic Policy Symposium in Jackson Hole, Wyoming.

That’s among the hawkish things members of the Fed have said that have a small minority of economists thinking that the Fed is feeling pretty good about the health of the US economy.

“Growth in nonfarm payrolls was weaker than consensus estimates at +151k, but above the pace Fed officials typically consider sufficient to hold the unemployment rate steady over time—the so called ‘breakeven rate,'” Goldman’s Hatzius said. “We therefore see this report as just enough for a large majority of officials to support a September rate increase. We have therefore raised our subjective odds of a hike this month to 55% from 40%.”

Barclays Michael Gapen smooths out the monthly number by looking at job gains from a rolling 3-month perspective.

“In light of the rebound in employment since mid-year and with the three-month moving average of employment at 232k in August, we believe recession risks are low and, given Fed Chair Janet Yellen’s remarks at Jackson Hole, we believe the Fed will look through the somewhat soft August employment number and raise the policy rate in September,” Gapen said.

The balance of the year comes with lots of potential catalysts for market volatility, including the US presidential election in November. Then again, when it comes to risk and uncertainty, there’s always something.

Will the Fed hike rates on September 21? We’ll find in two and a half weeks.

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Sam Ro is managing editor at Yahoo Finance.
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