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U.S. September CPI takes center stage as rate-hike expectations for October and December face repricing

At 8:30 p.m. Beijing time on Wednesday, the U.S. September CPI and core CPI will be released, making them the most important macro trading events of next week. Recent employment data have been weak, and several Fed officials have said there is still time to assess economic performance before raising rates again. Market pricing for a rate hike on October 28 has fallen to 19%, after reaching 70% at one point. Meanwhile, markets have fully priced in a scenario in which rates are raised by 25 basis points in December.

In addition, U.S. September retail sales, PPI, and core PPI will all be released at 8:30 p.m. on Thursday. Also due are initial jobless claims for the week ending October 10, the New York Fed's Empire State Manufacturing Index, and the Philadelphia Fed Manufacturing Index. Markets will need to consider consumer spending, upstream prices, and employment data together to determine whether inflationary pressure stems from short-term energy disruptions or excessively strong demand.

Fed officials to speak frequently ahead of blackout period; Warsh to appear at IMF annual meetings on Friday
Fed officials are set to make a flurry of public appearances next week ahead of the blackout period. At 3:45 p.m. Tuesday, Fed Governor Waller will speak at the Bloomberg New Economy Forum. At 4:00 a.m. Wednesday, Boston Fed President Collins will deliver remarks, followed by Fed Governor Bowman at 5:40 p.m. The Fed will release its Beige Book at 2:00 a.m. Thursday.

At 4:30 a.m. Friday, Cleveland Fed President Hammack will speak. At 11:30 a.m., Fed Chair Warsh will attend the IMF annual meetings in Bangkok and take part in a fireside chat with IMF Managing Director Georgieva. Warsh's remarks will come after the release of U.S. CPI, PPI, and retail sales data. Markets will focus on how he assesses the latest inflation and consumer spending figures, and whether he continues to signal the possibility of a rate hike in December.

Minutes from the Fed's September 15–16 meeting showed that most officials felt it might be appropriate to raise the federal funds rate further before the end of this year, though they disagreed on the reasons for doing so. Some officials were concerned that supply shocks, such as energy prices, could continue to push inflation higher, while others believed demand and economic growth were too strong and could create broader price pressures.

On October 8, Waller said that if economic data came in as expected, further rate hikes could help bring inflation back to the 2% target more promptly, but hikes did not need to occur at two consecutive meetings. This suggests that unless CPI significantly exceeds expectations, the Fed can afford to wait for more data before taking action.

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