The financial world is bracing for new recessionary economic indicators. Eyes are on big US jobs report for September as well as ISM manufacturing and non manufacturing PMIs. New data dropped this week. It will especially set the tone for the marketplace about what to expect from the Fed’s monetary policy going forward.
While early implementation data hasn’t been perfect, Governor Bullock pointed out that it has generally exceeded expectations. This trend continues the positive momentum after the Federal Reserve’s dovish August meeting. He added that the long-term economic outlook is still rife with uncertainty, meaning policymakers should be on guard.
Key Economic Reports This Week
Due out on Friday is the U.S. jobs report for September, which will give us a detailed look at current employment trends. Analysts will be looking to this important economic report for further clues about the resilience of this labor market. Their findings have the potential to radically transform how the Fed makes decisions.
Due out is the ISM manufacturing PMI on Wednesday, with the non-manufacturing PMI on Friday. These reports are expected to provide more comprehensive and timely insights into when the economy in both sectors is expanding or contracting.
Governor Bullock stated, “We need to be alert to the risk that circumstances may change and be prepared to respond, if necessary.” This sentiment is indicative of the Fed’s understandably cautious response to the changing economic pains.
Fed’s Rate Cut Predictions
Indeed, recent inflation projections from the Fed’s fresh new dot plot yielded overwhelming consensus from policymakers that market sentiment is right on the money. They’re looking for two additional cuts by the end of this year. At least that’s the case looking ahead to 2026, where forecasts indicate a median dot pointing to just a one-quarter-point cut in rates.
Market analysts are pretty much united in their conviction that more cuts will be required next year. Financial analysts are projecting as many as three additional cuts in the pipeline. This ongoing confusion is paving the way for the Fed’s further missteps, especially as the harbingers of a forthcoming short-term rate increase start to materialize.
Policymakers have indicated that any rate hike will not be confirmed until there is more substantial evidence of economic stability.
Global Economic Context
On the international side, worsening economic signals from both China and Europe add to the unpredictability of the global market. New Chinese PMIs released yesterday confirm that the manufacturing sector has contracted for six consecutive months. This rebounding trend is good news, but underscores the ongoing demand on our nation’s economic lifeline.
At the same time, Eurozone traders get ready for preliminary CPI figures from Eurozone heavyweights, Italy, France, and Germany, due out on Tuesday. A big Eurozone CPI print Wednesday likely to shift market expectations even more. Here’s why analysts say inflation is really starting to cool in these regions. This recent development would increase the odds of ECB surprising with a “contingency cut”.
Stay tuned for the Summary of Opinions dropping this Monday! It should indicate their plans for addressing these developments.
In Australia, the Reserve Bank of Australia (RBA) will decide on monetary policy Tuesday. Here’s one market observers are watching just as closely, for its potential to impact wider financial trends.