With inflation coming in lower-than-expected for October, the market widely expects a 50-bps rate hike in December, a shift away from a 0.75% rate hike campaign. A majority of Fed officials also believe that a slowdown in the current pace of interest rate hikes would be appropriate soon. However, despite slowing rate hikes, interest rates need to rise higher than forecasts until they reach a “sufficiently restrictive” level.
Moreover, analysts projecting that U.S. fourth-quarter earnings will decline for the first time in two years, contracting business activities and a cooling labor market are all hinting towards a weakening economic momentum.
