Ahead of the FOMC meeting, interest rates are expected to hold steady due to persistent inflationary pressures, reflected by CPI and PCE figures. CPI recorded a 2.8% annual increase, while the Fed's preferred gauge, PCE, showed a 2.6% rate. The labor market remains strong with job creation at 151,000, although slightly below expectations. Consumer confidence has dropped significantly, potentially impacting spending behavior. Market participants are keenly observing future forecasts and the Fed's monetary policy outlook for insights into interest rates and economic growth, as growth forecasts project a slowdown.
The labor market continues to exhibit robust health with 151,000 new jobs last month, although these figures were slightly below expectations of 160,000 jobs.
Current forecasts reflect a slowdown in growth prospects, with estimates suggesting GDP growth below 2%, compared to 2.4% at the start of the year.
The UMich survey highlighted a sharp decline in consumer confidence to lowest since 2022, reflecting consumers' hesitancy to spend and their heightened inflation fears.
Future forecasts for inflation and economic growth, depicted in the Fed's 'Dots', will attract increasing attention among market participants, as markets do not anticipate an interest rate cut.
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