A high likelihood of a Republican sweep sees markets assess inflationary aspects of potential policies including tariffs
MNI (LONDON) - Executive Summary
- Former President Trump is now President-elect Trump after a strong performance that sees high likelihood of a Republican sweep.
- The FOMC cut its policy rate by 25bps as expected on Thursday but gave away few new signals over the future path, with Chair Powell once again emphasizing data dependence in setting policy while shrugging off recent volatility in inflation and employment readings. The Fed seems to have maintained its general outlook on the economy and the path of rates since the September meeting.
- ISM Services beat expectations again, including its employment component rising to the highest in over a year in a notable move after uncertainty over weather disruption in the October payrolls report.
- Continuing claims meanwhile surprised higher with a fresh almost three-year high suggesting a further steady moderation in the labor market, but initial claims don’t point to any worrying increase in layoffs.
- Early GDP tracking for Q4 points to real GDP growth of circa 2.5% Y/Y, some 50bps higher than the median FOMC forecast of 2.0% Y/Y from the September SEP.
- Fed Funds suggest another 25bp cut is more likely than not for December but with reasonable odds of a skip (17bp cut priced).
- Terminal rates are off post-election highs but have still increased further, with SOFR implied yields seen bottoming out a little over 3.70% for rates almost 90bps higher than the median FOMC participant’s longer run rate forecast.
- In the week ahead, CPI inflation on Wednesday before PPI inflation and Fed Chair Powell Thursday.
PLEASE SEE HERE FOR THE FULL REPORT: US week in macro_241108.pdf
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