Following the Federal Reserve’s recent interest rate increase two weeks ago, an upcoming slate of five economic data releases will determine whether another hike occurs in October.
Although the Fed chair cautions against letting individual data points dictate monetary policy, market traders continue to price their next moves directly off this week’s figures.
The Fed Raised Rates and Refused to Signal Its Next Move
The Fed bumped its benchmark rate up to a range of 3.75% to 4% on September 16, noting in its policy statement that inflation “remains elevated.”
Back in June, BeInCrypto reported that Bank of America anticipated three Fed rate increases over the course of the year, beginning in September.
During his press conference, Chair Kevin Warsh declined to commit to a second hike.
“Trends matter. Data points are noisy. Data point dependence is a dangerous preoccupation.”
Interest rate traders currently calculate roughly a 64% probability of a subsequent rate increase on October 28.
As higher rates boost the payouts for savings and bonds, capital tends to shift away from risk-sensitive assets like Bitcoin (BTC) and tech stocks. According to BeInCrypto data, Bitcoin currently trades close to $84,728.
1. Monday, Bank of Japan Minutes
According to its calendar, the Bank of Japan (BOJ) is set to release the minutes from its July 30–31 meeting on Monday morning, Japan time.
These minutes offer a written account of board member discussions during the period between rate increases. The BOJ previously raised its rate to roughly 1% in June, followed by another bump to about 1.25% on September 18.
The central bank’s September policy statement indicated it “will continue to raise the policy interest rate.” Because Japan’s rate stays more than 2.5 percentage points lower than the Fed’s, any indications of accelerated rate hikes in Tokyo could narrow that spread and send shockwaves through global bond markets.
Assets in play. Japanese government bonds, the yen, US Treasury yields, and Bitcoin.
2. Wednesday, PCE Inflation
The Personal Consumption Expenditures (PCE) index serves as the Fed’s preferred inflation gauge while also measuring consumer spending habits. Its “core” metric excludes volatile energy and food prices.
Data from the Bureau of Economic Analysis (BEA) shows core PCE increased 3.3% for the 12 months leading up to July, with August’s figure projected at 3.4%. The Fed maintains a 2% target.
Consumer spending is projected to grow by 0.5% in August, which would mark the most significant monthly expansion in over a year.
Assets in play. Treasury yields, the US dollar, the S&P 500, the Nasdaq, and Bitcoin.
3. Wednesday, GDP
The BEA will release its third and final estimate for second-quarter economic growth on the same morning. Gross domestic product (GDP) tracks the total output of the economy.
BEA figures indicated the second estimate pointed to a 1.5% annualized growth rate, slowing down from the 2.1% pace seen in the first quarter. An upward revision would provide the Fed with greater justification to maintain elevated interest rates.
Assets in play. Treasury yields, the US dollar, and the S&P 500.
4. Thursday, ISM Manufacturing Index
Each month, the Institute for Supply Management (ISM) polls manufacturing purchasing managers. Readings above 50 signal expansion in the manufacturing sector.
ISM reported that August’s index dropped to 54.6 from July’s 55.6, while its price sub-index remained constant at 71.1, indicating that factories continue to face rising costs.
Assets in play. Industrial stocks, Treasury yields, the US dollar, and oil.
5. Friday, Payrolls
The employment report for September concludes the week’s releases. Economists anticipate roughly 90,000 jobs added, down from August’s total of 162,000, with the unemployment rate projected to hold steady at 4.1%.
Bureau of Labor Statistics data previously showed a 0.3% rise in hourly wages for August. A robust employment update would underline a strong labor market and reinforce arguments for continued rate hikes.
As previously covered by BeInCrypto, Bitcoin experienced a price surge following the release of June’s lackluster jobs figures.
Assets in play. Treasury yields, the US dollar, the S&P 500, the Nasdaq, gold, and Bitcoin.
What the Week Means for Treasury Yields
Collectively, these upcoming reports will influence the Fed’s policy meeting scheduled for October 27 to 28, while also shaping the trajectory of US Treasury yields—the interest rates associated with government borrowing.
BeInCrypto previously noted that the 10-year yield recently pulled back from a 19-year high. By Friday evening, the Fed will have all this new evidence at hand, though whether policymakers choose to act on it remains the question Warsh opted not to answer.