Soft landing narrative challenged

Summary

United States: "Soft Landing" narrative challenged

• Following last week's FOMC meeting, where the emphasis remained on incoming data guiding the Fed's interest rate path going forward—especially in regard to the duration in which rates may remain elevated—the data calendar heated up this week with plenty of indicators providing insight as to whether the Fed's forecast of a "soft landing" is plausible.

• Next week: Construction Spending (Mon.), ISM Manufacturing & Services (Mon. & Wed.), Employment (Fri.)

International: Eurozone inflation slows, Eurozone growth remains subdued

• Eurozone inflation slowed sharply in September as the headline CPI slowed to 4.3% year-over-year and the core CPI slowed to 4.5% year-over-year. Meanwhile, a drop in Eurozone September economic confidence pointed to still-subdued growth trends. Together, we believe slowing inflation and subdued growth will see the European Central Bank keep its Deposit Rate steady at 4.00% at its next monetary policy announcement in late October.

• Next week: Japan Tankan Survey (Mon.), Australia Policy Rate (Tue.), New Zealand Policy Rate (Wed.)

Credit market insights: Catching up, but not there yet

• The Federal Reserve released the Distributional Financial Accounts overview last week, providing second-quarter estimates of the distribution of household wealth in the United States by the five percentile groups of wealth, income, age, education and race.

Topic of the week: At stake in the strikes

• Autoworkers were on strike for the second week amid ongoing negotiations between the UAW and all three major domestic automakers. With the strike relatively contained, the initial hit to production should be relatively mild, though it may make it more difficult to tame inflation amid a pause in vehicle disinflation and an expected jump in labor compensation costs, challenging the timing in which inflation can return to target.

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