Federal Reserve's Interest Rate Decisions: Insights from Powell's Speech and Upcoming Jobs Data
(Bloomberg) -- The Federal Reserve's strategy regarding potential interest rate cuts in November is set to gain clarity in the upcoming week, particularly as Jerome Powell, the Fed Chair, addresses economists and the government releases new employment figures.
On Monday, Powell will present his insights on the U.S. economic outlook at the National Association for Business Economics conference. By the end of the week, the anticipated September jobs report is expected to reveal a robust yet moderating labor market.
According to a Bloomberg survey of economists, payrolls in the U.S. are projected to increase by 146,000, mirroring the August rise and indicating that three-month average job growth is nearing its lowest point since mid-2019.
The unemployment rate is expected to remain steady at 4.2%, while average hourly earnings are forecasted to have risen by 3.8% year-over-year.
Recent labor disputes suggest that Friday's jobs report may be the last clear indication of the U.S. employment landscape before the Fed's early November meeting. Notably, Boeing Co. factory workers initiated a strike in mid-September, and dockworkers along the Atlantic and Gulf coasts are threatening to strike starting October 1.
In addition to the significant monthly payrolls report, job openings data set to be released on Tuesday is anticipated to show that August vacancies remained near the lowest levels since early 2021. Economists will also scrutinize the quit rate and dismissals to assess the cooling labor demand.
Economists, including Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou, and Chris G. Collins, predict a strong headline figure for September nonfarm payrolls, potentially reigniting discussions about a “no landing” scenario for the U.S. economy. However, they caution that the headline number may exaggerate labor-market strength due to inaccuracies related to the Bureau of Labor Statistics’ ‘birth-death’ model and temporary seasonal effects.
Industry surveys will also provide insights into private-sector hiring. The Institute for Supply Management will release its September manufacturing survey on Tuesday and its services index two days later, both of which will include employment metrics.
In Canada, home sales data from major cities like Toronto, Calgary, and Vancouver will reveal the real estate market's performance following a series of rate cuts by the central bank.
Additionally, global data indicating a slowdown in inflation across regions, including the eurozone, Turkey, and South Korea, alongside business surveys from China, will be significant highlights.
China will kick off the week with several purchasing manager indexes, following a broad set of stimulus measures that recently boosted stock prices. The official manufacturing PMI is expected to show a slight increase while remaining in contraction territory, with Caixin gauges predicted to hold steady just above the critical threshold.
Manufacturing PMI figures from Indonesia, Malaysia, Thailand, Taiwan, Vietnam, and the Philippines will be released the following day.
In Japan, Shigeru Ishiba is anticipated to be appointed as prime minister in a parliamentary vote on Tuesday. The Bank of Japan's Tankan survey is likely to reveal that large firms maintained optimistic business sentiment in the third quarter, while small manufacturers remained slightly pessimistic, with companies expected to slightly revise their capital spending plans upward.
South Korea's inflation is projected to have cooled in September, providing the central bank with further motivation to consider a rate cut in October, while price growth in Pakistan may have slowed to its lowest rate since early 2021.
Trade data from Australia, Sri Lanka, and South Korea is also on the agenda, with Vietnam set to release its third-quarter GDP and September inflation figures next weekend.
Eurozone data will be in the spotlight, particularly as inflation in France and Spain has dipped below the European Central Bank's 2% target. Reports from Germany and Italy on Monday, followed by the overall regional results on Tuesday, will be closely monitored. With traders now anticipating a rate cut at the ECB's October meeting, this data will be crucial for policymakers who previously leaned towards a December decision.
Industrial production figures from France and Spain on Friday will offer insights into the manufacturing sector's performance during the concluding quarter.
The week will feature several ECB appearances, starting with President Christine Lagarde's testimony to the European Parliament on Monday, followed by a conference in Frankfurt hosted by the central bank the next day.
Monday marks the final day in office for Swiss National Bank President Thomas Jordan, who has just overseen a rate cut and indicated more to come. His deputy, Martin Schlegel, will take over, with the first inflation data under his leadership expected to be released on Thursday.
In Sweden, minutes from the Riksbank's September 24 meeting on Tuesday will provide further insights into the rationale behind last week's rate cut and the potential for a faster pace of easing in the coming months.
The UK is expected to have a relatively quiet week, highlighted by appearances from Bank of England chief economist Huw Pill and policymaker Megan Greene.
Turkish inflation data due on Thursday is likely to show a slowdown to 48% in September, falling below the central bank's key rate of 50% for the first time in years. While this indicates progress, officials still face challenges in achieving a target of sub-40% inflation by year-end.
Several monetary policy decisions are scheduled across the region:
Colombian policymakers are almost certain to implement a seventh consecutive rate reduction on Monday, matching the longest easing cycle in over two decades. Economists anticipate a fifth straight half-point cut to 10.25%, suggesting that the easing cycle still has room to continue as inflation expectations decline. The meeting's minutes will be published three days later.
Most analysts expect that Chile's upcoming data release, which includes seven indicators such as industrial production, retail sales, copper output, and GDP-proxy data, will demonstrate that the economy is gaining momentum as the year draws to a close.
Consumer prices in Lima, Peru, are likely to have remained just above the 2% midpoint of the central bank's inflation target range in September. The central bank chief, Julio Velarde, has indicated that the year-end reading should fall between 2% and 2.2%, with the key rate potentially dropping about 100 basis points below the Fed's benchmark.
In Brazil, three purchasing manager indexes and industrial production data are expected to indicate that Latin America's largest economy is performing strongly, exceeding its potential growth rate. Reports on primary and nominal budget balances will also be released as public finances become a focal point once again.
--With contributions from Brian Fowler, Robert Jameson, Jane Pong, Laura Dhillon Kane, Piotr Skolimowski, Monique Vanek, Niclas Rolander, Paul Wallace, Demetrios Pogkas, and Ragnhildur Sigurdardottir.