October 27 PCE Inflation and Q3 GDP Release
November FOMC Minutes Unveiled the Day Before
Likely to Gauge December Rate Hold Decision
This week, Wall Street's attention is focused on U.S. inflation data and the release of the Federal Reserve's (Fed) November Federal Open Market Committee (FOMC) meeting minutes. With Fed Chair Jerome Powell signaling a slowdown in the pace of rate cuts, if the inflation slowdown stalls, the possibility of a rate hold in December is expected to increase.
According to the U.S. Department of Commerce on the 24th (local time), the Personal Consumption Expenditures (PCE) price index for October will be released on the 27th.
The core PCE price index, the inflation gauge most closely watched by the Fed, is expected to have risen 0.3% from the previous month and 2.8% year-over-year in October. Compared to the previous year, it is expected to have slightly jumped from September's 2.7%, marking the highest level in six months since April. The core PCE price excludes food and energy costs, providing an indicator of the underlying inflation trend. Inflation has been steadily slowing toward the Fed's 2% target, but it is struggling in the last mile?the final stretch before reaching the goal.
On the 26th, one day earlier, the minutes of the November FOMC meeting will be released. Investors are expected to focus on the Fed officials' economic assessments, outlooks, and the discussions regarding the future monetary policy path. If the FOMC minutes confirm hawkish (monetary tightening preference) messages from Fed officials and last month's PCE inflation rate exceeds market expectations, the likelihood of a rate hold in December increases.
Earlier, on the 14th, Chair Powell described the U.S. economy as "by far the best among major economies worldwide" and stated that "there is no signal that we need to rush rate cuts," sending a message that the pace of monetary easing could slow. The preliminary estimate of the U.S. third-quarter gross domestic product (GDP) growth rate, to be released on the 27th, is also expected to confirm solid growth again, recording an annualized 2.8% increase compared to the previous quarter.
The market is gradually increasing the probability of a rate hold next month. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market reflects a 47.3% chance that the Fed will hold rates steady at the FOMC regular meeting scheduled for December 17-18. This is up from 38.1% a week ago. The probability of a 0.25 percentage point rate cut next month has fallen from 61.9% a week ago to 52.7% on this day.
Anna Wong, an economist at Bloomberg Economics (BE), analyzed, "Several Fed officials commenting on the recent U.S. economic situation are echoing Chair Powell's recent remarks," adding, "A rate cut in December is not a foregone conclusion, and the central bank may slow the pace of easing as risks to the economy subside."
Meanwhile, this week, the New York Stock Exchange will have shortened trading hours due to Thanksgiving. The stock market will be closed on Thanksgiving Day, the 28th, and will close early on the following day, the 29th.
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