Macro Matters – Weekly review, w/c September 25

Macro Matters – Weekly Review, w/c September 25

Macroeconomic / Geopolitical Developments

• Fed Affirms “Higher for Longer” Mantra

• Swiss National Bank Surprises with Pause

• Cooling U.K. CPI Prompts Bank of England Pause

• Bank of Japan Stays Dovish

• Global Flash PMI Data Disappoints

• U.S. Government Shutdown Fears Wobble Markets

• What’s Ahead

Fed Affirms “Higher for Longer” Mantra

The Federal Reserve held interest rates steady last week but signaled the potential for one more rate hike in 2023. Updated dot plot projections showed higher rates for longer, surprising markets with elevated rate expectations for 2024 and 2025. While the Fed predicts stronger growth, signs of economic slowdown could accelerate rate cuts next year.

Swiss National Bank Surprises with Pause

The SNB unexpectedly paused its rate hikes, holding at 1.75%. Although Swiss inflation has eased, the SNB left the door open for future tightening. Analysts dubbed this a “hawkish pause,” reflecting cautious optimism about inflation trends.

Cooling U.K. CPI Prompts Bank of England Pause

The Bank of England halted its rate hike cycle for the first time in nearly two years, keeping the Bank Rate at 5.25%. This decision followed a slight dip in U.K. inflation to 6.7% in August, though it remains far above the BoE’s 2% target. Governor Andrew Bailey emphasized the possibility of further hikes if inflationary pressures persist.

Bank of Japan Stays Dovish

The BoJ maintained ultra-low interest rates, reaffirming its commitment to monetary easing despite rising domestic inflation, which hit 3.1% in August. Governor Kazuo Ueda emphasized caution, but the yen remains under pressure as Japan diverges from the Fed’s hawkish stance.

Global Flash PMI Data Disappoints

• U.S.: The S&P Global Flash U.S. PMI Composite Output Index dipped to 50.1 in September, indicating stagnation in private sector activity. Demand for services and new orders weakened further.

• Europe: Activity in Europe’s private sector contracted again, led by manufacturing, with new orders falling at their fastest pace since 2020.

• U.K.: U.K. flash PMI data hinted at a sharp economic downturn, with the most significant contraction since 2009 outside of pandemic-related disruptions.

U.S. Government Shutdown Fears Wobble Markets

Markets remained volatile amid rising fears of a U.S. government shutdown as Congress struggled to pass a funding bill before the fiscal year-end. The Biden administration urged lawmakers to approve a continuing resolution to avoid disruptions to federal operations and economic data reporting, crucial for Federal Reserve decision-making.

What’s Ahead

Key Data Points:

• Inflation reports from Germany and the EU

• U.S. Consumer Confidence (Tuesday)

• U.S. Durable Goods Orders (Wednesday)

• Fed’s Preferred Inflation Measure, PCE (Thursday and Friday)

• Fed Chair Powell’s Speech (Thursday)

Major Macro Data:

• 09/25: German IFO Survey

• 09/26: U.S. Consumer Confidence

• 09/27: BoJ Meeting Minutes, Australian CPI, U.S. Durable Goods Orders

• 09/28: German CPI, U.S. GDP, and PCE QoQ; Fed’s Powell Speaks

• 09/29: U.K. GDP, German Retail Sales, EU CPI, U.S. PCE (MoM, YoY), Canadian GDP

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