观点

Fed chair Kevin Warsh did not comment directly on monetary policy in dialogue held at the IMF meetings in Thailand, focusing his commentary on the investment outlook for the US economy.

On the central bank front, Fed Chair Warsh will join IMF Managing Director Georgieva for a fireside chat at the IMF- World Bank Annual Meetings at 11.30am SGT.

Liz Ann Sonders and Collin Martin open with the latest inflation data, where a hotter-than-expected core CPI reading raises questions about the Federal Reserve's next moves.

WHAT FED CHAIR WARSH SAID Warsh said nothing that would even remotely inform nearer term monetary policy considerations other than to repeat that he doesn’t believe in forward guidance into meetings.

Warsh pulled out the pom poms as cheerleader in chief for the US economy with generally upbeat remarks on the outlook.

We expect the Fed will need to increase the funds rate an additional 75bp to bring inflation to target.

As a result, this may not be enough to keep the Fed from raising rates an additional 75bp or more.

Still, following the stronger-than- expected inflation print and given Chair Warsh’s hawkish reaction function, we continue to favor flatteners.

Credit stress, even if concentrated in the weakest credits, should support the long end on a relative basis, while a hawkish Fed keeps pressure on the front end, potentially driving the curve into inversion.

As shown below, capital goods import prices have historically been a reliable indicator of changes in the headline PCE deflator , one of the Fed ’s preferred inflation indicators, suggesting that inflation pressures are likely to remain elevated.

And by my maths, Fed Chair Kevin Warsh’s favoured gauge of price pressures, the share of components with an inflation rate north of 3%, is still very elevated, albeit a little lower than it was.

If markets have got one thing right this week, it’s that the health of the AI trade matters enormously for the Fed’s ability not only to raise rates further, but to hold them there for any period of time.

That’s why, as we outline in our latest monthly update hot off the press this week, we still think the Fed can get away with only hiking once more in December – and why it could be cutting rates again as soon as late 2027.

Canada (James Knightley) Sep Inflation (Mon): Canadian inflation will have to come in especially hot to nudge market expectations towards anticipating a hike at the Bank of Canada policy meeting on 28 October, coincidentally the same date as the next Fed meeting.

Commodity Spot Prices** Foreign Exchange Cross Rates Fixed Income Yields Stock Market Indexes October 16, 2026 Weekly Bottom Line Highlights Canada U.S. Current Target Federal Reserve (Fed Funds Rate) 3.75 - 4.00% Bank of Canada (Overnight Rate) 2.25% European Central Bank (Refi Rate) 2.65% Bank of England (Repo Rate) 3.75% Bank of Japan (Overnight Rate) 1.25% Source: Bloomberg.

We now expect the Fed to raise interest rates by another 50 basis points over the next 12 months, but this remains more dovish than the current market pricing of nearly 90 basis points more.

Recent comments from several Fed officials support a more gradual tightening, with Vice Chair Philip Jefferson stating there is no immediate urgency to hike again, and New York Fed President John Williams saying he sees no need for further rate increases in 2027.

• Headline inflation expected to pick up to 3.6 –3.7% y/y, economic activity likely remaining above 3% y/y, MXN weakness, and the Fed’s hiking cycle are at odds with Banxico’s minutes showing that three of the five board members are leaning toward possible cuts.

• Headline inflation expected to pick up to 3.6 –3.7% y/y, economic activity likely remaining above 3% y/y, MXN weakness, and the Fed’s hiking cycle are at odds with Banxico’s minutes showing that three of the five board members are leaning toward possibl e cuts.

The Fed is still widely expected to leave rates on hold this month after recent communication from officials, including Fed Chair Kevin Warsh, failed to signal any urgency to tighten policy again.

The September CPI and PPI reports will have reinforced concerns within the Fed about the risk of more persistent inflation.

Markets are also awaiting Fed Chair Warsh’s comments for further guidance on the policy outlook.

Warsh’s explanation for the lack of guidance was that he doesn’t “pre -judged meetings”.

He also added that AI would “fundamentally change the conduct of monetary policy” that over time likely means greater uncertainty over the reaction function of the Federal Reserve and other central banks.

A December rate hike is still very likely but the pricing of hikes in 2027 looks overdone, which was a view expressed by New York Fed President Williams this week –one of the more senior members of the FOMC.

The US Federal Reserve (Fed) raised interest rates by 25 basis points (bps) in September — the first increase since 2023 — following Fed Chair Kevin Warsh’s hawkish comments about the strength of the US economy and elevated inflation risks.

A vast majority of Fed officials projected another hike this year.

Annual core Personal Consumption Expenditures inflation was 3.0% in August, below expectations but still well above the Fed’s target.

This will mean the FOMC have to remain modestly restrictive over the forecast horizon and will also bias up long-term yields.

We expect just one more hike from the Fed rather than the three the market currently has priced, with stretched housing affordability posing risks to both consumption and inflation.

Markets are beginning to worry that the Fed may need to tighten policy just as the US economy is losing momentum.

Markets continue to anticipate another Fed rate hike in December, but the outlook is becoming increasingly dependent on incoming growth data.

Boston Fed President Susan Collins said it would be appropriate to raise rates slightly further before year-end, broadly echoing recent comments from other Fed officials suggesting scope for one more hike.

Faster than expected inflation in the US for September –core CPI accelerated to 2.6% y/y from 2.4% a month earlier –has raised market pricing for a rate hike from the Fed at the end of the month.

San Francisco Fed president Mary Daly said further increases were likely needed but that there was no urgency to decide this month.

Senior Fed officials have since suggested that they can take their time on rate hikes with no need for moves at consecutive meetings, which means October’s FOMC meeting is widely expected to see policy left unchanged.

• We still expect an October Fed pause.

High inflation means the Fed was right to hike rates in September, but we expect the Fed to assess its effect before acting again.

Pricing for a 28 October Federal Reserve increase spiked above 50% intraday, then eased below 30% to finish lower than the day before.

Should the president force through “Trump dividend” payments, the Federal Reserve will come under even more market pressure to respond with higher interest rates, raising fears of a boom-bust cycle.

• US producer prices to inform PCE tracking • US retail sales face a tough act to follow • US lumber tariffs raise US housing costs • Will Fed’s Warsh say anything helpful tonight?

Key will be the categories within PPI that are included in the Fed’s historically preferred PCE measure of inflation.

Key could be how the day ends late at night when Chair Warsh speaks from Bangkok (11:30pmET).

Given the bond market unrest, we also expect the ECB to halt quantitative tightening before year-end, echoing earlier moves by the Federal Reserve and the Bank of England.

Using the Federal Reserve’s framework for estimating the growth impulse from financial conditions (see our 30 September 2026 Macro Signposts), we estimate that the equity wealth channel has provided roughly an additional 0.5–0.7 percentage point of support for growth – roughly 1x to 1.5x the growth impulse of the investment itself.