Economic news out of the US continues to confirm that the Federal Reserve is succeeding in bringing about a soft landing, where inflation is brought down to target and a recession avoided.

PCE inflation in September undershot expectations, and the core subindex is clearly now back at the Fed's target of 2%. Meanwhile, data released is so far consistent with growth around 3% annualised, though admittedly it is very early in the quarter.

While the November presidential election remains a coin toss and casts a pall of uncertainty, we think that the Fed is likely to revert to a cautious pace of rate cutting in 2025.

This Friday's payrolls report should once again be consistent with a labour market that is generating modest job growth but remains near full employment. Another miss here, however, could cause markets to brace for the possibility of a second straight 50bp rate cut from the FOMC at its next meeting in early-November.

The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.

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