Investor expectations for the Federal Reserve to maintain interest rates unchanged at the next meeting have significantly decreased. The upcoming inflation and employment data, set to be released next week, could further influence these expectations. Data from CME FedWatch indicates that the probability of the Federal Reserve keeping rates steady has dropped from nearly 20% earlier this month to just 2%.
Most investors are now betting on a 25 basis point rate cut by the Fed. The September Personal Consumption Expenditures (PCE) data is scheduled for release next Thursday, followed by the October employment data on Friday. Price data has shown that inflation persists but is not excessively high. However, employment figures might be affected by one-time events such as hurricanes and strikes.
As the market digests this data, the potential volatility may create both risks and opportunities for investors. The tightening financial conditions are evident, and market participants are adjusting their strategies accordingly. With data-driven expectations in focus, upcoming reports will serve as critical indicators for future monetary policy adjustments..