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Economists at U.K. bank Barclays, one of the primary dealers for U.S. Treasurys, pushed back their call for a Federal Reserve rate hike to January.
The move by Barclays came after a weaker-than-forecast 150,000 rise in payrolls, which also was accompanied by data showing the work week slipping by 0.1 hours. They also note that ISM reports were downbeat, leading the bank to reduce its fourth-quarter GDP forecast to 1.5% annualized.
That said, though data developments went in the Fed’s favor last week, financial conditions did not.
“Critically, [Chair Jerome Powell] elaborated that such developments matter for rate decisions only to the extent that they are ‘persistent’ and not simply ‘a reflection of expected policy moves.’
Developments since the meeting seemingly contradict both conditions, with the [10 year yield] retracing much of its increase since the September meeting, the stock market rebounding, and the dollar softening,” said economists led by Jonathan Miller. “In other words, the FOMC is caught in a circularity loop, as its intention to formulate policy based upon tightened conditions works to undermine this tightness.”
According to the CME FedWatch tool, markets are pricing in a 10% chance of another rate hike by December, and a 16% chance of a move by February.
U.S. stock futures
ES00,
inched higher while the yield on the 10-year Treasury
BX:TMUBMUSD10Y
rose 7 basis points to 4.59%.
