Market Update

The recent minutes from the Fed's monetary policy meeting on 22nd September 2021 weren't particularly revelatory. They echoed recent statements, emphasizing that policymakers are poised to begin tapering its QE program, which currently stands at $120bn in monthly bond purchases, either in mid-November or mid-December.
Intriguingly, while policymakers anticipate that current supply issues and bottlenecks might not be resolved until next year, they emphasized that conditions will probably keep interest rates low in the coming years due to the anticipated "persistent downward inflationary pressures."
This aligns with our perspective: a temporary spike in inflation doesn't necessarily forecast a long-term trend. Though the recent surge in inflation, influenced heavily by energy price hikes, was more than we anticipated, sustained high inflation would imply a continued deterioration and lack of resolution in supply chain challenges.
Moreover, despite the seemingly low unemployment rate, policymakers highlighted that the US is still a significant distance from achieving full employment. There are still nearly 5 million fewer payrolls compared to pre-pandemic numbers. Factors such as ongoing COVID-19 cases, disruptions in schools affecting childcare, and unemployment benefits have impacted the labor force participation rate. As these obstacles lessen and more individuals rejoin the workforce, we can anticipate wage pressures to diminish.
Reinforcing this perspective, data from 14th October 2021 indicated that initial jobless claims have dropped to 293,000 and continuing claims to 2.59 million, marking the lowest figures since March 2020. This supports our optimism regarding the ongoing improvement of the US job market.
Also, the US PPI data was below what most economists projected, further indicating that inflation isn't spiraling uncontrollably.
In the upcoming week, our attention will be on: US & Chinese industrial production data, US housing figures, CPI statistics from the UK & Japan, retail sales data from the UK & China, Chinese Q3 GDP, and the Eurozone PMI.