Odds of an October Federal Reserve rate hike jumped to 71% after Fed Governor Michael Barr voiced support for further tightening and fresh economic data showed intensifying inflation pressures.
In remarks prepared for a housing conference in Chicago, Barr said policymakers still have more work to do even after last week's quarter percentage point increase. "In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion," he said. "We want to support sustainable, durable growth in support of maximum employment, and price stability is crucial to that."
The same day, S&P Global reported its flash gauges for manufacturing and services activity hit their highest levels in more than four years. The services index reached 58.7, the highest in 59 months, while the manufacturing index climbed to 56.7, a 53-month peak. The composite index rose to 58.4, a 62-month high. Readings above 50 indicate growth.
Inflation and Employment Signals
- S&P Global's overall inflation measure hit its highest level since October 2022, driven by higher fuel, transportation costs and rising wages.
- Chris Williamson, chief business economist at S&P Market Intelligence, said input costs jumped in September "at the steepest rate for four years," citing fuel and transport cost spikes tied to rising oil prices.
- Job growth in the PMI surveys rose at a rate not seen since June 2022, S&P said, describing it as "a pace rarely exceeded since comparable data were first available in 2009."
- Service sector employment expanded at its fastest rate since June 2002, while manufacturing employment grew at its highest pace since February 2021.
