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  • It seems that, in recent weeks, the chances of the Federal Reserve hiking interest rates at their next November 1 decision have diminished. Here are some key points to note:

It seems that, in recent weeks, the chances of the Federal Reserve hiking interest rates at their next November 1 decision have diminished. Here are some key points to note:

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ANDIE ANDERSON
October 17, 2023

  1. Market Expectations: The probability of an interest rate hike in November is currently estimated at less than 10%, down from around 30% following the Federal Reserve's Monetary Policy Committee meeting on September 20. This shift in market expectations suggests that a November rate hike is unlikely.

  2. Rising Bond Yields: Long-term Treasury bond yields have increased, with the 10-year yield rising from 4.5% to 4.65% since the Fed's last meeting in September. This increase in yields might be attributed to concerns about U.S. fiscal policy. However, the Fed interprets this move as reducing the need for higher short-term interest rates. In particular, the cooling wage growth indicated in recent jobs data is in line with what the Fed was hoping for, which might lessen the urgency for rate hikes.

  3. San Francisco Fed's Perspective: Mary Daly of the San Francisco Fed suggested on October 5 that the recent tightening in the bond market might be roughly equivalent to a single rate hike from the Fed. However, it's worth noting that bond yields have moderated since then, with an incremental tightening of around 0.15% today, as yields dropped after Daly's statement.

  4. Mixed Fed Statements: Various Fed officials have provided mixed signals. On October 9, Fed Vice Chair Philip Jefferson mentioned that the Federal Open Market Committee (FOMC) is in a position to proceed carefully. He highlighted the sensitivity of the current period and the need to balance the risk of not tightening enough against the risk of policy becoming too restrictive.

In summary, while the possibility of an interest rate hike in November has diminished, it's important to note that conditions can change rapidly, and the Fed's decisions are influenced by a variety of economic factors. As of now, it appears that a rate hike in December is considered more likely than in November, but the final decision will depend on economic data, market conditions, and the Federal Reserve's assessment of the overall economic landscape.

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