The week ahead of another earnings season will be relatively quiet for US investors, after having breathed a sigh of relief over the recent down-to-the-wire signing of a continuing resolution that prevented the US government shutdown. 

This week’s news will be mostly dominated by US employment data leading up to the next Fed meeting at the end of the month. Employment figures finally appear to be taking notice of the Fed's aggressive tightening cycle, and since wages and salaries are a significant input cost for businesses, a decrease in these numbers generally results in lower prices for goods and services and a welcome decline in the inflation rate.

The statistics will be an important component of the Fed's decision-making process as it evaluates the present status of the US economy and the right path of monetary policy. After raising rates by a quarter-point in July, the central bank held interest rates steady at the current range of 5.25% to 5.5% last month.

Also this week, the RBA and RBNZ will also consider whether their respective interest rates are restrictive enough to bring inflation back to target without crippling their respective economies. Having paused the monetary tightening cycle a few times so far this year, both central banks are awaiting the arrival of new inflation and employment data among others, in the hopes that the peak for interest rates has already been reached.

RBA meeting - Tuesday 3rd of October

Tuesday at 3:30 AM GMT, the Reserve Bank of Australia will release its decision from its latest Monetary Policy meeting. 

This week’s meeting will be the first under the leadership of the bank’s new Governor, Michele Bullock. In the last meeting held under Governor Philip Lowe, the RBA decided to keep its cash rate at 4.1%, prolonging the rate pause for a third consecutive month. 

Inflation, according to the board and its minutes from September, has passed its peak, but current values are still excessively high and are expected to remain so for some time. 

However, recent Australian Bureau of Statistics data revealed that in the twelve months leading up to August, the monthly CPI index increased to 5.2% from 4.9% the month prior, which should be cause for concern for the bank. The biggest price increases were in housing (+6.6%), transportation (+7.4%), food and non-alcoholic drinks (+4.4%), and insurance and financial services (+8.8%).

According to a recent poll of economists, regardless of the new inflation data, the RBA will keep its benchmark interest rate at 4.1% this week, but will likely increase it to a top of 4.35% in the next quarter.

RBNZ meeting - Wednesday 4th of October

Wednesday at 1:00 AM GMT, the Reserve Bank of New Zealand will release its decision from its latest Monetary Policy meeting. 

At its August meeting, the RBNZ left the official cash rate at 5.5%, maintaining the rate pause for a second consecutive month. After a total of 525bps of rate rises since October 2021, the board observed that monetary conditions are gradually limiting consumption and decreasing cost pressure. 

After reaching a three-year high of 6.7% in the first quarter of this year, the annual inflation rate dropped to 6% in the second quarter. The latest figures for the third quarter are due on the 16th October, and are projected to have dropped only slightly below the current rate. 

Having said that, the RBNZ said last month that to return inflation to the desired 1–3% annual range by the second half of 2024, interest rates will need to continue at a tight level, but it maintained its prediction that rates will have peaked at 5.5%. 

Economists polled by Reuters predict that the New Zealand bank will keep its benchmark interest rate at 5.5% this week and will hold it at this level until its first rate cut in around March next year.

US employment data

Tuesday at 2:00 PM GMT, the US Bureau of Labor Statistics will release the JOLTs Job Openings figures for August.

In July, there were 338 thousand fewer open positions than expected, bringing the total to 8.827 million, the lowest number since March 2021. Job openings may decline for a fourth consecutive month to roughly 8.6 million in August, showing that the labor market could be cooling after months of the Fed tightening monetary policy.

Wednesday at 12:15 PM GMT, Automatic Data Processing Research Institute will publish its Employment Change figures for September.

Private companies in the US employed 177 thousand employees in August, the fewest in five months despite market expectations of a 195 thousand gain and a revised 371 thousand increase in July. An estimated 160 thousand new jobs will be created in September, further confirming a cooling trend in hiring. 

Investors often watch this information as it offers a preview of job growth numbers two days before the often similar official government employment statistics are made public.

Friday at 12:30 PM GMT, the US Bureau of Labour Statistics releases its Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings and Participation Rate- among others.

August's employment growth of 187 thousand was above the market consensus of 170 thousand and July's revised job gain of 157 thousand. Despite this, for the third month in a row, employment growth fell below the 200 thousand threshold, indicating a gradual loosening of labor market conditions. 

An increase of around 163 thousand new jobs is predicted to be reported by the BLS for September, but the annualized average hourly wage is predicted to remain the same at 4.3%.

Meanwhile, the Unemployment Rate increased to 3.8% in August from 3.5% in July, which was above market predictions and the highest level since February 2022. Analysts expect this figure to drop again to around 3.7% this month.

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