Fixed-income markets have fully priced in a fourth consecutive 75-basis-point rate hike at next week’s Federal Reserve (Fed) meeting. 1 However, during a talk on Friday at the University of California, San Francisco Fed President Mary Daly started to prepare investors by commenting that it was time to “start planning for stepping down” the size of rate hikes.2
Following months of Fed officials aggressively hammering home their inflation-fighting resolve, President Daly’s message was the first dovish-leaning communication in months. Daly also suggested that 4.5% to 5% was still the likely landing spot for the federal funds rate before any talk of a pause would be considered. 3
This week’s economic calendar is a busy one, highlighted by our first look at third-quarter U.S. gross domestic product data out Thursday and new readings on the Fed’s favorite inflation gauge — personal consumption expenditures — on Thursday and Friday. This week will also be busy on the earnings front with nearly one-third of all S&P 500 Index companies reporting, including most of the large-cap tech names such as Alphabet, Apple, Amazon and Microsoft. 4
1 Source: Reuters- U.S. yields slide from multi-year highs on hopes of Fed pivot; 10/21/22
2 Source: MarketWatch- Fed’s Daly: Time to start talking about slowing interest-rate hikes; 10/23/22
3 Source: Bloomberg- Daly Says Fed Should Start Planning for Smaller Rate Hikes; 10/21/22
4 Source: MarketWatch- This Week's Major U.S. Economic Reports & Fed Speakers; as of 10/24/22
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