📢 In the wake of today's release of key economic data for September, including US retail sales, industrial production, and housing statistics, investors are eagerly awaiting Federal Reserve Chair Jerome Powell's upcoming speech. Scheduled for Thursday, October 19, Powell's address will provide a pivotal overview of the prospective interest rate trajectory in advance of the next Federal Open Market Committee (FOMC) meeting.
The recently disclosed minutes from the September FOMC meeting have unveiled the potential for an additional interest rate hike within the remainder of the year. The duration of this more hawkish stance will be contingent upon the deceleration of economic activity in relation to the Fed's 2% inflation target. According to a report by CNN, financial markets are currently factoring in the likelihood of another pause in rate hikes, possibly occurring in December.
It's worth noting that the Federal Reserve has already initiated 11 rate hikes since March 2022, reaching a 22-year high. These actions have sparked considerable debate due to their potential impacts. The cessation of further rate hikes is anticipated to hinge on a slowdown in economic growth and job market activity. However, the recent United Auto Workers strike has introduced a new element of uncertainty, which poses both an "upside risk to inflation and a downside risk to economic activity." 📉
Furthermore, Federal Reserve officials have forecasted fewer rate cuts in 2024, and they plan to maintain the current interest rate level until at least May, as reflected by CME FedWatch. These expectations for a "higher for longer" rate environment have put downward pressure on bond prices, driving up yields on US Treasury bonds. This increase in benchmark yields has, in turn, led to higher interest rates on various financial products, from car loans to mergers and acquisitions.
⏰ Notably, Powell's remarks at the Economic Club of New York are strategically timed just before the communication blackout period, which spans from October 21 to November 2. During this time, Federal Reserve officials are prohibited from making public comments. The next FOMC meeting is slated to occur between October 31 and November 1.
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