Next week will be a busy one in the US with the upcoming Federal Reserve meeting being the main focus. We don’t expect any change in policy rates after the recent rise in Treasury yields led to a tightening of financial conditions across the economy. The market seems to be doing the heavy lifting, so there’s no need for the Fed to do much more, even though growth and the labor market remain hot and inflation is still well above target. Federal Reserve Chair Jerome Powell has also acknowledged that the long and variable lags between the implementation of rate hikes and the real-world impact point to the possibility that the full impact of policy tightening has yet to be realized. have full effect.
The key data report we should keep an eye on will be the employment figures. After the jump of 336,000 in September, the market expects a much weaker result of 175,000 in October. Recent unemployment claims figures have suggested that while layoffs remain historically low, the rise in continuing claims suggests growing difficulties in finding new work. We expect unemployment to remain at 3.8%, but wage growth could slow to 4% year-on-year, marking a post-pandemic low. This should encourage the Federal Reserve to think that pipeline price pressures are easing and that it does not need to raise interest rates further.
Finally, keep an eye on the US Treasury’s quarterly refund statement, which will outline plans for the next debt issuance (and in a 6% GDP deficit environment, this is expected to be significant). .