Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower after Minneapolis Federal Reserve Bank President Neel Kashkari said the central bank might need to lift its policy rate above 4.75% if underlying inflation continues to accelerate.
Mortgage demand hit its lowest level since 1997, according to the Mortgage Bankers Association. Mortgage applications fell 4.5% in the week ending October 14, which is the fourth consecutive decline. Applications to purchase a home loan decreased 3.7% and the refinancing index dropped 6.8%.
Yesterday it was reported that the October housing market index declined for the 10th straight month to 38 when 44 was expected.
Housing starts in September were 1.439 million when 1.475 million were anticipated.
The Federal Reserve will release its “Beige Book” on the economy at 1:00 central time. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Federal Reserve district bank compiles anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts.
CURRENCY FUTURES
The U.S. dollar index is higher after Neel Kashkari’s hawkish comments.
Although higher today, the greenback has been underperforming the news in recent weeks.
The euro zone annual inflation rate was revised slightly down to 9.9% in September 2022 from a preliminary estimate of 10.0%.
The Swiss Franc remains near parity with the U.S. dollar, closing in on the lowest level since May 2019 as the difference between interest rates in Switzerland and in the U.S. remains wide.
The Japanese yen fell to another new 32-year low. Bank of Japan Governor Kuroda recently said it is not appropriate for Japan to raise interest rates now.
INTEREST RATE MARKET FUTURES
Futures are lower due to hawkish comments from Neel Kashkari.
The Treasury will auction 20-year bonds.
Federal Reserve speakers today are Neel Kashkari at 12:00 and Charles Evans at 5:30.
According to financial futures markets, there is a 94.0% probability that the Federal Open Market Committee will increase its fed funds rate by 75 basis points at the November 2 policy meeting and a 6.0% probability that the rate will be hiked by 50 basis points.
Last week there was a 2.0% probability that the FOMC could increase its fed funds rate by 100 basis points.
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