By Siddarth S
(Reuters) -Global brokerages are split over whether the U.S. Federal Reserve will cut interest rates in December or hold them, following conflicting signals on job growth and unemployment
earlier in the week.
Data on Thursday showed non-farm payrolls increased by 119,000 jobs in September after a downwardly revised 4,000 drop in August. Economists polled by Reuters had forecast 50,000 jobs would be added.
However, the unemployment rate increased to a four-year high of 4.4% in September.
J.P. Morgan and Standard Chartered joined Morgan Stanley in withdrawing their forecasts for a 25-basis-point rate cut next month.
On the other hand, Deutsche Bank, Citigroup, Wells Fargo and BNP Paribas reiterated their forecast of a 25 bps cut, but acknowledged the probability of the Fed keeping rates steady had risen significantly.
The divide comes as some analysts argued the rise in the jobless rate supported the case for another interest rate cut next month.
"A December cut is admittedly a close call, but we think the steady rise in the unemployment rate to 4.44% will be enough to encourage 'open minded' officials to support a cut," Citi said.
Other brokerages said the better-than-expected job growth suggested the U.S. central bank should stay pat, especially since policymakers would not get another employment report before the December 9-10 meeting.
"The absence of November labor data may make it harder for doves to insist on the need for a cut," Standard Chartered added.
Traders are betting on a 67.1% chance for the Fed to keep rates steady in December, as per the CME FedWatch tool.
Nomura and BofA Global Research retained their expectations of no rate cut in December.
"A December cut is still not our base case, but it's a closer call now," BofA added.
(Reporting by Siddarth S, Joel Jose and Akriti Shah in Bengaluru; Editing by Sherry Jacob-Phillips and Krishna Chandra Eluri)
