The eagerly anticipated September employment situation report, per details in our charts section, did not cement another cut or a pause at the December 10th FOMC. The tug-of-war between employment and inflation forces should persist, and Fed member viewpoints on conditions should make for lively debate within the Fed. In the past week, multiple Fed members expressed concern about inflation. In reaction, the market has downgraded the chances of another imminent cut. Additionally, the October FOMC Minutes released this past week revealed increasing mentions of inflation concerns, despite the 25-bps cut that was delivered. The upcoming week contains a slew of reports crammed into a holiday-shortened week. Some of the backlog of federal government-issued data is still to be scheduled, and more announcements are expected in the week ahead.

We are now experiencing a “higher for longer” phase in the interest-rate cycle, accompanied by an inversion in the short-to medium terms followed by a steepening (see following chart). The Fed is still in a restrictive posture, but market expectations indicate a near-term easing, however, uncertainty surrounding the potential of future heightened growth leading to elevated inflation is causing steepening at the longer-end of the curve…

Kristina Hooper discusses her outlook for the economy and markets for the remainder of 2023 and beyond. From recent challenges in the banking industry to inflation to earnings, 2023 has already faced a variety of uncertainties…