Rates at 3.9% as Fed October Meeting Begins on 27 and 28

Key Facts

The Federal Open Market Committee began its meeting on 27 and 28 October, while investor forecasts point to a very low probability of an increase in the interest rate, which stands at about 3.9%, according to an Associated Press report. The Federal Reserve chair will hold a press conference on 28 October, at the conclusion of the meeting, which investors are watching for clues to the direction of monetary policy. Some investors and economists had earlier expected a quarter-point increase, to about 4.1%, after inflation data came in above most economists’ expectations for two consecutive months. But futures pricing later shifted to a very low probability of an increase. That puts inflation and the labor market at the center of debate over the Fed’s next move.

August data cited by the Bureau of Economic Analysis show the personal consumption expenditures price index rose 3.4% year over year and 0.3% month over month. The core index, excluding food and energy, rose 3.0% annually and 0.2% monthly. September jobs data showed nonfarm payrolls increased by 29,000, while unemployment held at 4.2%. The average monthly job gain over the previous twelve months was 45,000, putting September’s reading below that average. Against the backdrop of price pressures, an Associated Press report said diesel reached a record $6.53 per gallon in late September, then fell to $6.35 in October.

The backdrop to the October meeting also included rising long-term interest rates in markets. Federal Reserve Vice Chair Philip Jefferson said committee officials need to form their own judgment about the increase, adding that it “may take longer.” His remarks indicate that market yield moves factor into officials’ assessments, but do not determine them on their own. The Associated Press report did not provide a figure for those yields in the context of the remarks. CenterPoint shares closed at $41.20 on 26 October, while Herc Holdings shares closed at $127.13 the same day, according to EL7 data.

In markets, the S&P 500 closed Monday, 26 October, up 0.7%, while the Dow Jones rose 0.3% and the Nasdaq gained 0.8%, according to the Associated Press. In Tuesday trading, the Nikkei 225 rose 1.7%. The moves came during a week in which investors are watching for the Fed’s decision, alongside corporate disclosures. CenterPoint had scheduled its third-quarter results call for 27 October at 8:00 a.m. Eastern time. Coverage of Herc’s results published on 27 October also reported that equipment rental revenue rose 12% year over year in the third quarter.

Attention turns after the meeting to the September personal income and outlays report, which includes personal consumption expenditures price index data and is scheduled for release on 29 October at 8:30 a.m. Eastern time. The October jobs report is scheduled for release on 6 November at 8:30 a.m. Eastern time. These releases will provide more recent readings on prices and employment following the August and September data available ahead of the meeting. Minutes of the October meeting will be released on 18 November, followed by the committee’s next meeting on 8 and 9 December. These dates give investors successive milestones for tracking data and reviewing Fed officials’ discussions.