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Weekly Economic & Financial Commentary: FOMC Set to Announce Another 75 bps Rate Hike Next Week

Summary

United States: Another GDP Head Fake

  • Real GDP expanded by an annualized 2.6% during Q3. The Employment Cost Index moderated to 1.2% in Q3. Personal income improved 0.4%, while personal spending increased 0.6%. Pending and new home sales cratered 10.2% and 10.9%, respectively, in September. Consumer confidence fell to 102.5 in October.
  • Next week: ISM Surveys (Tue, Thu), Trade Balance (Thu), Nonfarm Payrolls (Fri)

International: Spooky Times Ahead

  • Survey data from the Eurozone painted a more pessimistic growth outlook, while the European Central Bank still opted to go for another 75 bps rate hike to quell inflation. Elsewhere, the Bank of Canada slowed down the pace of its rate hikes to 50 bps and signaled that the end of its tightening cycle is near. Last but not least, U.K. PMI survey data indicated that sentiment—and the overall growth outlook—is deteriorating.
  • Next week: Eurozone CPI (Mon), Reserve Bank of Australia (Tue), Bank of England (Thu)

Interest Rate Watch: FOMC Set to Announce Another 75 bps Rate Hike Next Week

  • The Federal Open Market Committee (FOMC) meets next Tuesday and Wednesday, and we expect it to announce a 75 bps increase in the target range for the federal funds rate. This move is widely anticipated by economists and market participants alike, and it would be a major surprise if the committee deviated from 75 bps.

Topic of the Week: Third Quarter Earnings Season in Full Swing

  • The corporate earnings season is in full swing with large technology companies having reported results for the third quarter this week. Despite some dissappointing results, S&P 500 operating margins are shaping up to remain solid in the third quarter, which bodes well for U.S. economy-wide margins released at the end of November.

Full report here.

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