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[Quick Facts]

1. U.S. recession is no longer the consensus.

2. Biden can't squeeze Iranian and Russian oil at the same time.

3. Fed's Bullard says markets are too complacent on inflation and rates may rise to 6.5%.

4. U.S. consumer confidence drops as inflation fears increase.

5. Fed's Harker says rate hikes are likely over.

6. Oil prices were volatile in the past week under the Middle East conflict.  

[News Details]

U.S. recession is no longer the consensus

In the Wall Street Journal's latest quarterly survey, economists began to be optimistic about the U.S. economy. They now believe that the U.S. will avoid a recession, the Federal Reserve has finished raising interest rates, and inflation will continue to ease. Business and academic economists also saw less probability of a recession next year, from 54% on average in July to a more optimistic 48%. That is the first time they have put the probability below 50% since the middle of last year.

Biden can't squeeze Iranian and Russian oil at the same time

The United States wants to tighten sanctions against Russia and Iran, but doing both at once will bring great political risks to President Joe Biden. U.S. Treasury Secretary Janet Yellen said earlier that new measures against Iran were possible, but she said nothing about the most obvious way to hurt Iran, which is to restrict the flow of oil. It is clear that any substantial cuts in Iranian oil exports will only increase market demand for oil from competitors such as Russia, and that will also tighten global oil markets.

Fed's Bullard says markets are too complacent on inflation and rates may rise to 6.5%

Former St. Louis Fed President James Bullard said investors were too complacent about inflation and the Fed might have to raise interest rates to 6.5% if inflation heats up again. He believes the market is underestimating the risk that inflation decline stalls or stops and core inflation starts to rise again, which would spark a new round of panic among policymakers about whether the Fed has taken enough action. If this happens, the FOMC will have to consider raising interest rates to 6% or 6.5%.

U.S. consumer confidence drops as inflation fears increase

The U.S. consumer confidence retreated by about 7% this October after two consecutive months of marginal changes. Assessments of personal finances fell by about 15%, mainly due to a sharp increase in inflation fears, while one-year business conditions were down 19%. Long-term expectations of business conditions changed little, however, suggesting that consumers do not believe that the current deterioration in economic conditions will continue. In addition, confidence declined across all demographic groups, reflecting the persistent impact of high oil prices.

Fed's Harker says rate hikes are likely over

U.S. Philadelphia Fed President Patrick Harker said on October 13 that the evolution of the U.S. economy and financial conditions was better than he had expected as prices were cooling and labor market tensions eased. I am sure that the policy rate is restrictive, and as long as the policy rate remains unchanged, we will steadily bring inflation down and make the market more balanced, Harker said.

The Fed has made progress in bringing down prices without causing a surge in unemployment or otherwise tanking the economy. He believes that the Fed can watch the impact of interest rate hikes on the economy and use incoming data as its guide to where policy needs to go.

According to the analysis of recent data and market feedback, the Fed can keep the federal funds rate at its current level and stop raising interest rates. However, he "would have no hesitancy to support further rate increases" if inflation were to rebound, he said.

Oil prices were volatile in the past week under the Middle East conflict

Oil prices have had a tumultuous week. It wasn't long ago that oil prices jumped 4% as Iran said a new conflict between Israel and Hamas could happen. Traders are now trying to consider the possibility that the conflict could bring Iran into the picture, as it is a supplier of weapons and money to Hamas. In addition, they also consider the risk of broader oil supply disruptions. Last Friday's rally suggested that the market removed bearish bets ahead of the weekend.

[Focus of the Day]

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UTC+8 22:30 Philadelphia Fed President Harker speaks on the economic outlook

UTC+8 04:30 Next Day: Philadelphia Fed President Harker speaks on the economic outlook