The past week was bereft of influential economic data. However, given the government shutdown resolution, a bevy of data should hit the calendar in the weeks ahead. Scheduling is still in a “TBA” state as of this writing. Recent private data reports have generally reflected a softening labor market and thereby kept the odds of another 25-bps Fed ease in December near the “50-50” pricing level, despite inflation-related data and sentiment remaining above the Fed’s 2% target. Essentially, a tug-of-war persists between employment and inflation forces, and these conditions should make for lively debate within the Fed regarding policy. The week ahead offers a slew of data, but much of it may still be delayed. Meanwhile, the tariff policy case before the Supreme Court will remain a topic to monitor, although potential market impacts are a bit murky at this stage.

We are now experiencing a “higher for longer” phase in the interest-rate cycle, accompanied by an inversion in the short-to medium terms followed by a steepening (see following chart). The Fed is still in a restrictive posture, but market expectations indicate a near-term easing, however, uncertainty surrounding the potential of future heightened growth leading to elevated inflation is causing steepening at the longer-end of the curve…

Kristina Hooper discusses her outlook for the economy and markets for the remainder of 2023 and beyond. From recent challenges in the banking industry to inflation to earnings, 2023 has already faced a variety of uncertainties…