Two Fed Officials Less Hawkish

STOCK INDEX FUTURES

Stock index futures are lower but bounced off of the overnight lows.

Yesterday, two Federal Reserve officials cited the need for caution on rate hikes.

Fed Vice Chair Lael Brainard noted how previous rate increases, together with anticipated further rate hikes, will slow the economy in ways that cannot be observed yet during a speech Monday.

She said the Fed is attentive to risks of further adverse shocks, aware that market moves could interact with financial vulnerabilities.

In addition, she said the Fed was likely to continue raising rates and maintaining them at higher levels to ensure inflation comes back to the Fed’s 2.0% target.

Also on Monday Chicago Fed President Charles Evans said under his current outlook for the economy, it would be appropriate for the central bank to pause rate increases at slightly more than 4.5% by next March and then assess how the economy was reacting.

The September National Federation of Independent Business small business optimism index was 92.1 when 91.5 was expected.

Market participants are awaiting Wednesday’s release of the minutes of the Federal Reserve’s September 21 policy meeting.

The September producer price index report will be released on Wednesday, and on Thursday the September consumer price index will be released.

Also, third quarter earnings season kicks off this week.

CURRENCY FUTURES

The U.S. dollar index is lower in response to a slightly less hawkish tone to Federal Reserve comments yesterday.

There may not be much left on the upside for the greenback on the belief that the Federal Reserve may tone down its hawkish rhetoric.

The British pound is higher on news that the jobless rate in the U.K. fell to 3.5% in the three months to August of 2022, which is below 3.6% in the previous period and market forecasts of 3.6%.

INTEREST RATE MARKET FUTURES

Prices are higher due to yesterday’s comments from Federal Reserve officials.

Federal Reserve speakers today are Patrick Harker at 10:30 and Loretta Mester at 11:00..

The Treasury will auction three-year notes today.

According to financial futures markets, there is an 84.0% probability that the Federal Open Market Committee will increase its fed funds rate by 75 basis points at the November 2 policy meeting and a 16.0% probability that the rate will be hiked by 50 basis points.

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