US consumer price inflation for September rose slightly faster than the consensus forecast, pushing up dollar and Treasury yields.
Meanwhile, US payrolls increased in September, underscoring the strength seen in economic activity over the summer, supporting the Federal Reserve’s argument about the need to keep interest rates high longer.
The market price around the possibility of a December rate hike has risen marginally, but our US economist doubts that will happen. Federal Reserve officials have been emphasizing the importance of rising Treasury yields as a factor that will tighten financial conditions and reduce the need for another rate hike.
Our American economist believes that monetary policy is sufficiently restrictive and does not believe that the Fed will raise it again.
High rates have been a drag on the consumption of industrial metals. Looking ahead to 2023 and further into 2024, the possibility of the US Federal Reserve continuing to raise rates and other major economies continuing monetary tightening remains the main uncertainty for metals markets.
If US rates stay high longer, this would lead to a stronger US dollar and weaker investor sentiment, which in turn would translate into lower metal prices.