The Federal Reserve’s moves on dealing with the decades-long inflation has been a major driver in financial markets in recent months. In its September meeting, the bank approved the third consecutive super-sized rate hike of 75 basis points.
Notably, the ultra-hawkish stance has been weighing on riskier assets like precious metals, US stocks, and cryptocurrencies. For instance, gold price has dropped by close to 17% since hitting its two-year high of $2,072.69 in March. Over the same period, Bitcoin price has declined by over 50% as the risk-off sentiment persists.
Analysts’ outlook of the Fed
Traders are keen on the US jobs data scheduled for release on Friday for cues on the Fed’s move in coming months. With that in mind, economists have different opinions on the Fed’s decision and its impact on the US and global economies.
On the one hand, CNBC’s Jim Cramer has argued that the recent economic data points to the Fed easing on its policy tightening. On Tuesday the analyst stated, “This rampant inflation may not be as malignant as the hawks seem to believe, and that means the Fed might ratchet down the next interest rate increase.”
To substantiate his argument, Cramer notes that the Chicago Purchasing Managers Index (PMI) dropped in September to its lowest level since 2020. At the same time, job openings dropped by over 1.1million in August; the largest single-day decline in over two years.
On the other hand, the Head of Global Markets Research at Nomura, Rob Subbaraman stated, “…specifically for the Fed we’re in the camp at Nomura that it’s still a long long way in terms of when we’re going to see them pause.We don’t think it’s until after the March meeting. ”
In the ensuing sessions, markets will be eyeing the US nonfarm payrolls and unemployment rate set for release on Friday. Strong numbers will point to further policy tightening by the Fed while weighing on riskier assets.