Daishin Securities "High Probability of FOMC Hold in November"

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Daishin Securities announced on the 31st that there is a high possibility that the Federal Open Market Committee (FOMC) will keep the benchmark interest rate unchanged in November.

Jae-woon Cho, a researcher at Daishin Securities, stated, "81.1% of market participants predict the benchmark interest rate will be held steady." The remaining 18.9% expect a 25bp (1bp = 0.01 percentage point) increase.

Researcher Cho explained, "The focus in the coming week will be on the FOMC, labor market reports, and economic indicators," adding, "The labor market report is expected to show a slight slowdown in employment."

The market expects the Employment Cost Index for the third quarter to rise by 1.0% compared to the previous quarter. The rate of increase in the Employment Cost Index is expected to remain steady, following a decline from 1.2% in the first quarter to 1.0% in the second quarter, indicating stable wage growth pressure.

The September job openings in the JOLTS report, to be released on November 1, are expected to be 9.2 million. If this estimate is met, it would indicate a return to a cooling trend after a rebound in August.

New unemployment claims are expected to remain at the same level as the previous week. Researcher Cho analyzed, "Continuing unemployment claims have been rising recently, suggesting a slowdown in the labor market. However, employment indicators should consider the possibility of a temporary slowdown due to the automobile union strike."

On the other hand, the third quarter Gross Domestic Product (GDP) and manufacturing sector continue to show improvement, presenting mixed signals. The U.S. third-quarter GDP growth rate was preliminarily estimated at an annualized 4.9%. This is higher than the previous quarter's final figure (2.1%) and exceeds market expectations (4.7%). It marks the fastest growth since the fourth quarter of 2021 (6.9%).

The ISM Manufacturing Index recorded 49.0 last month, still below 50. However, the factory orders index is expected to rise by more than 1.9% compared to the previous month, indicating signs of an expanding economy.

Researcher Cho diagnosed, "The increased third-quarter GDP driven by robust consumption suggests a low likelihood of economic contraction," adding, "Although rising bond yields increase the probability of slower economic growth and inflation, if growth continues and the labor market strengthens again, there remains a slight possibility of interest rate hikes."

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