Brown Brothers Harriman expects the Federal Reserve to hold rates at 3.75% to 4.00% this week, as investors await Thursday’s official inflation and growth data.
At its Sept. 16 meeting, the committee approved a quarter-point increase, setting the target range at 3.75% to 4.00%. Its statement described economic activity as solid and said inflation remained elevated, while reaffirming the Fed’s 2% inflation goal. The committee meets Oct. 27-28, with its decision set for 2 p.m. ET (18:00 UTC) Wednesday, Oct. 28.
BBH strategist Elias Haddad expects a hold. In its Oct. 25 note, BBH said its reading of futures markets put the chance of an October increase at 10%, while a Dec. 9 hike appeared nearly fully reflected in trading. A separate Atlanta Fed dashboard showed an 86.86% probability of a hike by Dec. 16 as of Oct. 23. The readings use different horizons, and their calculations are not reconciled in the cited sources, so they are not directly comparable. EconoTimes previously covered market pricing that favored a December increase over an October move.
BBH projects September personal consumption expenditures (PCE) inflation at 0.5% month over month and 3.6% year over year. Its forecast for core PCE, which excludes food and energy, is 0.3% monthly and 3.1% annually. August’s reported figures were 0.3% monthly and 3.4% annually for headline inflation, and 0.2% and 3.0% for core inflation. September results have not yet been released.
For third-quarter real gross domestic product (GDP), BBH expects growth at a 3.2% annualized rate, compared with the official 2.2% rate in the second quarter. The Atlanta Fed’s GDPNow estimate was 3.5% on Oct. 20; the New York Fed’s Staff Nowcast stood at 2.7% in its Oct. 23 update. These are separate estimates; the advance reading from the Bureau of Economic Analysis (BEA) will provide the official initial figure for the quarter.
In its October flash survey, S&P Global reported a U.S. Composite Output Index reading of 57.6, lower than September’s 58.4 but still indicating expansion. Its measure of selling-price inflation rose at its fastest pace since August 2022, with energy, freight and supply-chain costs among the pressures on businesses. Haddad argues that resilient activity and rising price pressures could keep further tightening in view and support the U.S. dollar. The BEA is scheduled to release September PCE data and its advance third-quarter GDP estimate Oct. 29 at 8:30 a.m. ET (12:30 UTC).
