Baker Market Update
2024-10-11

FOMC Minutes, CPI numbers, Jobless Claims, and Hurricanes – oh my! It’s been an interesting week in the bond market to say the least.

We received a little more insight from the FOMC meeting minutes on what was discussed specifically when the Federal Reserve cut rates last month. It turned first to a review of the development of the financial markets. “Nominal treasury yields declined notably over the period, driven by weaker than expected data releases, especially the July employment report in early August” stated the minutes. They also discussed elevated market volatility in early August, policy expectations, international developments, money markets, and desk operations. We also read that Federal Governor Michelle Bowman preferred in this meeting to lower the target range for the federal funds rate by 25 basis points to 5 – 5.25% in light of core inflation remaining well above the committee’s objective which is a labor market that is near full employment and solid underlying growth. She also expressed her concern that the committee’s large policy action could be seen as premature declaration of victory on the price stability part of a dual mandate.

CPI numbers were released this week. Both the headline and the core CPI came in at 0.1% point higher than forecast for the month with a 0.2% increase in the headline index and a 0.3% rise in the core. Food prices helped propel the headline figure, which came in hot even as gasoline and energy costs more broadly declined. The core figure was driven by the service costs. On an annual basis, the headline index rose 2.4% in September, slightly less than 2.5% the month before, while the core figure accelerated for the first time in 1 ½ years, to 3.3% from 3.2%.

Weekly jobless claims came out on Thursday and showed a much bigger than expected increase of 258,000, against the median forecast of 230,000. The states that had the most claims increase was Michigan which came in first due mostly to layoffs and followed by North Carolina, California, Florida, Indiana, Kentucky, and Tennessee. On an unadjusted basis, more than half of the advance was tied to states affected by hurricane Helene, including North Carolina and Florida. The jobless claims data are likely in for a stretch of volatility in the wake of the hurricanes Milton and Helene. Complicating efforts by the Federal Reserve to accurately gauge underlying developments in the US labor market.

Next week we see some more information on Monthly Budget Statements, Empire Manufacturing, NY Fed 1 year Inflation expectations, Import and Export Price Index numbers, retail sales information, and the NAHB Housing Market Index. Have a good long weekend everyone! Enjoy your fall break and OU/Texas weekend!