How Long Can America's 'Goldilocks' Moment Last?; Inflation Data, Fed Minutes in Focus This Week

How Long Can America's 'Goldilocks' Moment Last?; Inflation Data, Fed Minutes in Focus This Week By Hardika Singh

U.S. inflation data for September and Federal Reserve minutes of its last policy meeting, when it opted for a jumbo interest-rate cut, are set to take center stage this week as markets remain uncertain about the size of future rate reductions.

The Fed is expected to cut interest rates again at its meetings in November and December but likely by the slower-and more usual-pace of 25 basis points. Another big reduction remains possible, however, with the U.S. money markets pricing in a total of around 67 basis points of rate cuts for those two meetings, according to LSEG Refinitiv data.

In a recent speech, Fed Chair Jerome Powell said the central bank's policymakers would likely continue to cut interest rates but they didn't currently see a reason to lower rates as aggressively as they did at their most recent meeting.

Another key piece of data will be the University of Michigan's preliminary consumer survey for October due on Friday, which will give a snapshot of how the U.S. economy is currently faring. Other data due during the week include trade figures for August on Tuesday, weekly jobless claims on Thursday and September producer prices on Friday.

Elsewhere, France's expected announcement of its 2025 budget and European Central Bank minutes will be watched, while rate decisions are due in New Zealand, South Korea and India. Investors will continue to keep a close watch on events in the Middle East that have affected markets recently, sometimes sparking moves into safe-haven assets. Read more .

Top News How Long Can the U.S. Economy's 'Goldilocks' Moment Last?

Investors were breathing two big sighs of relief on Friday. Thursday evening brought news that a port workers strike from Maine to Texas, which threatened to paralyze the economy, would end after just a few days. Then came Friday's ebullient jobs report.

The U.S. economy added 254,000 jobs in September, well above estimates for 150,000. Job totals for July and August were revised up. The three-month moving average of job gains, a helpful gauge to smooth out monthly volatility, stood at 186,000 in September, up from 140,000 in August.

That looks close to a "Goldilocks" report-warm enough to reassure investors that the U.S. economy is chugging along, but not so hot that it dissuades the Federal Reserve from continuing to cut rates at a gradual pace. Futures markets are pricing in a 99% chance of a quarter-point rate cut at the Fed's next meeting in November, according to the CME Group's FedWatch tool.

But investors should remember that even Goldilocks didn't have long to enjoy her porridge before the bears showed up. Read more .

U.S. Hiring Accelerated in September, Blowing Past Expectations Japan to Watch Impact of Yen Moves on Corporate, Household Activity

Japan's new finance minister pledged to consider policy responses against sharp currency moves based on how they affect the real economy, a comment that comes as growing global economic uncertainties spur volatility in foreign-exchange markets.

U.S. Economy Why Mortgage Rates Haven't Fallen Since the Fed Cut

The Fed cut interest rates, then mortgage rates went up . That is a reminder of the complexity of mortgage pricing-and a warning that lower rates from here are not a foregone conclusion, writes The Wall Street Journal's Telis Demos.

With Interest Rates Falling, Which Bonds Should You Buy?

With inflation waning and the U.S. central bank starting to cut interest rates to shore up a halting economy, fixed-income experts say it is a good time for investors to reassess their bond portfolios .

Trump's Plan Boosts Budget Deficits by $7.5 Trillion, Double Harris's

Donald Trump's flurry of recent tax-cut promises pushed his fiscal plan deep into red ink , and he would increase budget deficits by more than twice as much as Democratic rival Kamala Harris would, according to a new study that is among the most comprehensive estimates to date of the candidates' proposals.

Big Oil Urges Trump Not to Gut Biden's Climate Law Changing Jobs Can Put a $300,000 Dent in Retirement Savings

Switching jobs can boost your pay and prospects. It can also drag on retirement savings. Over a four-decade career, that can mean as much as $300,000 less in retirement wealth for someone with average pay, Vanguard Group found.

Financial Regulation Carrying a Credit-Card Balance Has Gotten Way More Expensive

Americans can't remember a time when it cost as much to carry a credit-card balance. Banks have been raising interest rates on credit cards for years, and some are lifting them higher still to recoup the revenue they fear losing from a new cap on late fees.

Millions of Dollars in Tax Refund Checks Are Getting Stolen

Taxpayer refund checks are getting stolen in the mail. And then, when the Treasury Department issues the taxpayer a new check through the mail, the replacement is getting stolen too .

Forward Guidance Monday (all times ET)

3 p.m.: Consumer credit

6 p.m.: Fed Bank of Atlanta President Raphael Bostic moderates conversation at Atlanta Fed's Leading Voices Series event

Tuesday

6 a.m.: NFIB Index of Small Business Optimism

8:30 a.m.: U.S. trade deficit

12:45 p.m.: Fed Bank of Atlanta President Raphael Bostic speaks at Atlanta consular corps luncheon

Research Issuance of Green Bonds Could Bounce Back in 2025

Issuance of green bonds--which finance environmentally-friendly projects--has dropped in the past three years but could rebound next year, ING credit strategist Timothy Rahill says in a video recording. Concerns about 'greenwashing'--where statements about a company's environmental credentials are considered questionable--and regulation have reduced green-bond supply at a time when demand for credit has been plentiful, but it could pick up once that demand ebbs, he says. "Demand will still be there for credit overall [in 2025] but there could be bigger differentials between segments, thus ESG [environmental, social and governance] supply can very much come to the forefront." The second quarter saw $367 billion in green-bond issuance, versus $511 billion in the same period of 2021, before issuances started declining, ING says. - Jessica Fleetham

Basis Points One of the biggest simplifications in markets is to buy cyclical sectors when the economy's booming , and defensives in a slowdown. It's obvious-until you try to decide what's cyclical and what's defensive. A keen understanding of volume, or the level of trading activity, can give investors a clearer idea of a stock's or market's strength. And unusual changes in volume help point investors to potential changes in price direction. German manufacturing orders plunged more than expected in August , adding further gloom to the struggling sector that offers little sign of a recovery. Shoppers in the eurozone spent a little more in August, offering signs of a recovery in consumer expenditure, albeit moderate, as price rises lose heat. Retail trade was 0.2% higher over the month than in July. (Dow Jones Newswires) Uganda's central bank cut its key lending rate to 9.75% from 10%, as Africa's top coffee exporting nation extends a policy easing stance amid increased investments in its fledging oil and gas industry. Inflation is projected to ease despite the recent increase in food prices. (DJN) India's central bank is tipped to keep its policy repo rate at 6.50% on Wednesday, according to the median projection of a poll of 13 economists by WSJ. Of those polled, 11 expect Reserve Bank of India to stand pat, and two expect a 25 basis point cut. (DJN) The Bank of Korea is tipped to cut its policy rate from a 15-year high of 3.50%. Twenty out of 28 economists surveyed by The Wall Street Journal forecast a quarter-point cut to 3.25% on Friday, while the remaining eight expect the BOK to delay the cut until November. (DJN) In its quarterly regional economic report released Monday, the Bank of Japan raised its assessment of two of the nation's nine regions. It maintained an unchanged view for the rest of the areas. (DJN) Chinese stocks have shot up more than 35% in under three weeks after Beijing took coordinated steps to stabilize its economy in mid-September. But to sustain gains, investors now need China's government to deliver more details on its plans for revitalization. (MarketWatch) About Us

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ's global team of reporters and editors. This newsletter was compiled by markets reporter Hardika Singh in New York. Send your tips, suggestions and feedback to [hardika.singh@wsj.com].

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

October 07, 2024 07:19 ET (11:19 GMT)

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