Today’s Headlines, Fed Minutes, and UK Labour Market

This evening will see the release of the FOMC’s minutes for their last policy meeting back in September. Here, markets will be looking for any further insight into policy makers’ monetary policy stance to try to gain an indication on the Fed’s future rate path. On 20 September while New York met market expectations in holding rates, policy makers signalled support for the possibility of another hike this year. With the Fed maintaining their benchmark policy target rate at 5.25-5.5% (its highest level in 22 years), their Dot Plot also indicated that there would likely be less rate cuts in 2024, namely two cuts instead of four. Such a hawkish hold, accompanied by a flurry of strong data, fed into further dollar strength.

Nevertheless, as we looked at yesterday, Reuters are noting that the “CME Group’s FedWatch showed the estimated chance of a rate hike at the Fed’s upcoming meeting plummet from around 27% at the start of the day to around 14% after the two officials spoke. The chance of a rate increase at the December meeting fell from around 36% to 24%.” This came on the back end of the Vice Chair of the Fed Philip Jefferson indicating that “We are in a sensitive period of risk management, where we have to balance the risk of not having tightened enough, against the risk of policy being too restrictive”. Jefferson further reiterated the time-lag implications of rate hikes, noting that the full impact of the Fed’s monetary tightening was yet to be felt. As such, there is seemingly a disparity in what the market projects the Fed will do next and what their Dot Plot released on 20 September suggests. Hence, markets will be keeping a close eye on today’s minutes to try to gain some clarity on the Fed’s future path.

This morning’s UK labour market report from KPMG and the Recruitment and Employment Confederation found that employers have cut their job vacancies for the first time in over two-and-a-half years”, though the fall in job vacancies was cited as being marginal. The report also stated how “Improved demand for short-term staff meanwhile helped to drive a modest uptick in temp billings that was the most pronounced since April.”

Regarding pay, the report (which is sent out to some 400 UK recruitment and employment consultancies) noted how “pay pressures continued to weaken, with rates of starting salary inflation and temp wage growth edging down to 30- and 31-month lows respectively”.

Here, Neil Carberry, REC Chief Executive, said: “This feels like a market that is finding the bottom of a year-long slowdown. And the relative buoyancy of the private sector is likely to be driving this more positive outlook – while vacancies are now dropping, they remain robust in the private sector by comparison to the public”. All eyes now turn to the ONS’ latest release of unemployment, wage growth and economic activity rates on 17 October.