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Financial markets seem be increasing their dovish views with three major economic events in the next week.
The charts and news events below paint a picture of slowing economic growth and inflation. That’s making investors think the Federal Reserve will skip a rate hike next week, and potentially cut in the first quarter of 2024.
First, job openings fell to 8.7 million in October — about 450,000 fewer than expected. The total is now back to its lowest level since March 2021. That’s consistent with a weaker job market and could potentially argue against further rate hikes.
Second, the yield on the 10-year Treasury note dropped to 4.17 percent yesterday. It’s the lowest level since September 1, and could reflect a belief that interest rates will decline over the longer term.
Third, crude oil futures (@CL) closed at their lowest price since July 20. Lower energy prices can reduce inflation.
Fourth, the Atlanta Fed’s estimate of economic growth in the fourth quarter has dropped by almost half since late November. Slower economic growth would typically drive down interest rates.
Those bring us to the fifth chart: CME’s FedWatch tool. Notice how odds of a cut in March have grown in the last week.
Here’s a lineup of the big economic events that could impact rates:
Finally, some news developments could keep rates lower. These headlines are also consistent with potentially slower economic growth and lower inflation:
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