After the Federal Reserve began its interest rate cut cycle, global capital markets benefited and stock markets in multiple countries hit new highs.
Next week, the market will witness two major events, both of which will affect the Federal Reserve's monetary policy.
Next Monday, Federal Reserve Secretary Powell will deliver a speech discussing the outlook for the US economy.
Next Friday, the US government will release non farm payroll data for September.
The September employment report is expected to show a healthy labor market in the United States, but with some moderation.
The market expects that the number of employed people in the United States is expected to increase by 146000 in September, similar to the increase in August, which will bring the average three-month employment growth in the United States close to the lowest level since mid-2019.
The unemployment rate is expected to remain at 4.2%, and the average hourly income is expected to increase by 3.8% compared to the same period last year.
Bloomberg economists predict strong growth in non farm payrolls in September, which may even reignite discussions about a "no landing" for the US economy.
But Bloomberg believes that the overall data will exaggerate the strength of the labor market, partly because the models of the US Bureau of Labor Statistics exaggerate the strength of the labor market, and partly because of temporary seasonal effects.
In addition to the employment data for September, job vacancy data will also be released next Tuesday, which is currently expected to show job vacancies in August approaching the lowest level since early 2021.
In addition, the market will also pay attention to the turnover rate and layoff rate to measure the degree of cooling labor demand.
How much interest rate will be cut in November?
With the start of the interest rate cut cycle, the importance of inflation related data has decreased for the Federal Reserve, and economic related data such as employment have become more important.
The employment report next Friday is the last employment data before the Fed officials' meeting in early November, which will affect the Fed's decision on interest rate cuts.
In addition, data shows that inflation in the United States is gradually moving towards the Federal Reserve's 2% target.
This Friday, the Federal Reserve's preferred inflation indicator, the August PCE annual rate, fell more than expected to 2.2%.
At present, there is still significant divergence in the market regarding the magnitude of the November interest rate cut, with a probability of 53.3% for a 50 basis point cut and 46.7% for a 25 basis point cut.
The market also expects a 100% probability of the Federal Reserve cutting interest rates by more than 75 basis points within the year, which means there will definitely be a significant 50 basis point rate cut at the November and December meetings.
Officials: gradual interest rate cuts should be implemented
Recently, Alberto Musalem, the President of the St. Louis Federal Reserve, stated that the Fed should gradually reduce interest rates.
Musalem pointed out, "For me, the most important thing at this stage is to relax the brakes, which is to gradually ease the restrictions of policies
Musalem is one of the officials expected to cut interest rates multiple times this year and will become a voting member of the Federal Open Market Committee next year.
He acknowledges that the labor market has cooled down in recent months, but remains optimistic about the outlook given the low layoff rate and the potential strength of the economy.
He said that the business sector is in a "good state" and overall activity is "steady", and stated that large-scale layoffs do not seem to be "imminent".
However, he also acknowledged that the risks faced by the Federal Reserve may require it to cut interest rates faster.
Musalem bluntly said, "I realize that the economy may be weaker than I currently expect, and the labor market may also be weaker than I currently expect. If that's the case, then accelerating the pace of interest rate cuts may be appropriate
Last week, Federal Reserve official Waller also stated that if the data weakens faster, he would be "more willing to actively cut interest rates".