Summary
- U.S. employment and consumer spending are holding firm, drawing attention to the possibility of an additional Fed rate hike.
- Markets are placing greater weight on the possibility that, after raising its benchmark rate this month, the Fed could deliver another 0.25 percentage-point increase at its October meeting.
- Euro-area inflation is forecast to reach 3.7%, the highest level in three years, raising the prospect of a third ECB rate hike this year.
Forecast Trend Report by Period
Expectations that U.S. hiring and consumer spending will remain resilient are sharpening attention on the possibility of another interest-rate increase by the Federal Reserve.
Bloomberg reported on Sept. 26 that economists expect U.S. nonfarm payrolls for September, due on Oct. 2, to increase by about 90,000. The unemployment rate is projected to hold at 4.1%, the lowest level in a year. Analysts say stronger corporate capital spending and a recovery in consumption are supporting the labor market.
The U.S. personal consumption expenditures report for August, due on Sept. 30, is also a key focus. Real personal spending, which excludes the effects of inflation, is forecast to rise 0.5% from a month earlier, marking the biggest gain in more than a year. The PCE price index, the Fed's preferred inflation gauge, and the core PCE price index, which excludes food and energy, are also projected to accelerate from the previous month.
Solid growth and mounting price pressures are increasing the chances of further Fed tightening. Markets are placing greater weight on the possibility that, after raising its benchmark rate this month, the Fed could deliver another 0.25 percentage-point increase at its October meeting. Investors will use the jobs and inflation data to assess the path of monetary policy.
In Asia, interest-rate decisions by major central banks and inflation readings will be in focus. The Reserve Bank of Australia will hold a monetary policy meeting on Sept. 29, while Indonesia and South Korea will release inflation data on Oct. 1 and Oct. 2, respectively. A key variable will be how rising global oil prices tied to conflict in the Middle East and food-price volatility caused by El Niño feed into inflation.
In Europe, inflation pressures are also expected to intensify. Euro-area inflation due on Oct. 2 is forecast at 3.7%, which would be the highest level in three years. Rising energy prices are pushing up consumer prices, fueling talk of a third interest-rate increase this year by the European Central Bank.
In the U.S., the Job Openings and Labor Turnover Survey, or JOLTS, is due on Sept. 29, followed by the Institute for Supply Management's September manufacturing index on Oct. 1. A fresh run of economic reports is expected to test the durability of U.S. growth and inflation pressures, adding to the potential for volatility in global financial markets.
