MNI US Macro Weekly: Mind The Gap

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Executive Summary

• Fed Chair Powell and Gov. Waller support measured easing whilst talking on the discrepancy between weak labor and stronger activity indicators, ahead of the media blackout starting this weekend before the Oct 28-29 FOMC meeting.
• Waller sounded marginally less dovish whilst Gov. Miran was even more dovish, citing a new risk from US-China trade tensions and an urgent need for more neutral policy.
• Powell indicated that we may be near an end for QT "in coming months", in line with MNI expectation.
• State-level jobless claims data pointed to initial claims at a healthy ~218k seasonally adjusted in the week to Oct 11, albeit with a wider error band with some larger states missing in latest data. The broad release still chimes with a “low fire, low hire” characterization of the labor market.
• Arguably the joint most important release along with claims, the Fed’s Beige Book pointed to weaker growth conditions and a subdued labor market but with price pressures building again. We deem it the joint most inflationary Beige Book of 2025 along with June judging by the dispersion of price descriptions. 
• The NY Fed’s Empire State survey showed strong manufacturing activity and rising price pressures, but the Philly Fed survey saw a sharp drop in sentiment. Services activity from the NY Fed was notably weak.
• After three steady days for markets, Thursday saw a sharp deterioration in risk sentiment on US regional bank concerns before a sizeable recovery on Friday.
• A 25bp rate remained fully priced for the Oct 29 FOMC decision throughout but we saw up to 20% odds of a 50bp cut in December before receding. There are currently back-to-back 25bp cuts fully priced for the two meetings left this year, building to 100bp by mid-2026.
• Next week’s macro focus will be the delayed September CPI report on Friday. Bloomberg consensus sees headline CPI at 0.4% M/M and core CPI at 0.3% M/M, the latter after a slightly stronger than expected 0.35% M/M in August. US Tsy Sec Bessent has also indicated he will meet China Vice Premier He in Malaysia a week Saturday.