Last week, the Federal Reserve delivered yet another 75 basis point rate hike as the battle against persistent inflation rages on. Markets were torn on FOMC day, as they responded favorably to the policy statement but sold off as Chair Jerome Powell took to the podium. Traders will likely look to the slate of Federal Reserve speakers this week for additional clues as to the December meeting. On top of a full slate of Fedspeak, markets will also digest the October CPI print on Thursday. If CPI bucks the recent trend and starts to show concrete signs of rolling over, the tone of speakers from the Federal Reserve may shift.
 

US Economic Calendar

Courtesy of the DailyFX Economic Calendar

The week kicks off with Susan Collins (voter) and Loretta Mester (voter) participating in a moderated discussion on women in economics. Just last week, Collins stated that “with rates now in the restrictive territory, I believe it is time to shift focus from how rapidly to raise rates, or the pace … to determining what is sufficiently restrictive.” This change in tone comes after the market keeps questioning the meaning of the new sentence in the policy statement that refers to cumulative tightening. Bets for a 50 bps rate hike in December have increased notably while the Fed’s terminal rate has pushed beyond 5%.

This week sees Thomas Barkin (non-voter) of the Richmond Fed speak multiple times, and despite his non-voting status on the FOMC, his rhetoric mirrors that of Chair Jerome Powell. On Friday, Barkin said, “we need to do whatever we need ... to get inflation back to target.” Barkin continued on to say that he expects a slower pace of rate hikes, but a “higher endpoint.”
 

Upcoming Federal Reserve Speakers (Fed Speak)

Markets may also look to Christopher Waller’s discussion at Queensland University on Thursday with interest, as it is the last batch of comments the market will receive ahead of the October CPI report. Just last month, Waller had indicated that recent inflation data still, in his mind, did not warrant support for “a slower pace of rate hikes or a lower terminal policy rate than projected in the September 2022 SEP.” This sentiment from early last month echoes that of Fed Chair Powell, who indicated that the December SEP may show a forecasted terminal rate higher than that of the September dot plot.

It would appear that we are entering an interesting period following last week’s FOMC meeting, as markets continue to take the shift in tone from the Fed in stride. A cooldown in the US Dollar and rallies across risk assets have loosened financial conditions, which sits contrary to the Fed’s stated aim(s). Attention now shifts to how the Fedspeakers will follow up on last week’s interest rate hike. Will there be pushback on the recent rally in risk, or will speakers stick to the script and focus on the incoming data?

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