Economy

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen on Thursday urged the World Bank Group and other multilateral development banks to revamp their business models and dramatically boost lending to address pressing global needs such as climate change.In a speech ahead of next week’s World Bank and International Monetary Fund annual meetings, Yellen said she would ask World Bank management to develop an “evolution roadmap” for changes by December, with “deeper work” beginning by the spring of 2023.Among changes she is requesting are plans to harness more private capital and use more concessional loans and grants to fund investments that more broadly benefit the world, such as helping countries transition away from coal power.”Given the scale of the challenges, the development banks must continue to explore financial innovations to responsibly stretch their existing balance sheets,” Yellen said at the Center for Global Development, a think tank in Washington.Her directive was made just weeks after World Bank President David Malpass came under fire for declining to say whether he accepted the scientific consensus on global warning.Malpass said his answer to a question on the topic at a forum was mishandled and that he believes human activity is responsible for climate change, but no shareholders have asked him to resign.A World Bank spokesperson said the institution was actively working to expand climate-related trust funds, grants and donor guarantees as it explores ways to increase lending capacity.”We welcome the discussion on capital adequacy and Secretary Yellen’s leadership on the evolution of IFIs (international financial institutions) as developing countries face a severe shortage of resources, the risk of a world recession, capital outflows, and heavy debt service burdens,” the spokesperson said in an emailed statement.Yellen made clear that climate change was a prime example of a global challenge that required changes by development banks, calling it “an existential threat to our planet.”She announced a $950 million Treasury loan to the Clean Technology Fund (CTF), a multilateral trust fund that helps developing countries accelerate their transition from coal power to clean energy, the first of its kind from the Treasury.BALANCE SHEET STRETCHYellen said the World Bank and other multilateral development banks (MDBs) need to adopt stronger targets for mobilizing private finance and deploy a broader range of instruments, including loan guarantees and insurance products. She said MDBs needed to preserve their ability to borrow from financial markets, but did not mention the debate over whether they could accept lower credit ratings.Nancy Lee, a senior policy fellow at the Center for Global Development, said the World Bank could boost lending capacity by hundreds of billions of dollars without jeopardizing its credit rating. This could be done by including callable capital – money pledged by governments but not currently “paid-in” – as part of its capital adequacy framework, she added.The development think tank and other groups are advocating that the World Bank also launch a “green capital increase” focused on boosting lending to address climate change.On macroeconomic issues, Yellen said the top priority for countries facing high inflation was to return to an environment of stable prices – a fight she said was primarily the responsibility of central banks.She said the Group of Seven members have “committed to market-determined exchange rates. But we are attentive to the political consequences of exchange rate movements.” More

BERN/GRANDE DIXENCE, Switzerland (Reuters) – Having dodged most of the fuel-driven surge in inflation plaguing its neighbours, Switzerland is moving ahead with plans to boost its energy security and lock in tame power prices – but only reluctantly.Switzerland’s focus on hydropower, which Energy Minister Simonetta Sommaruga calls “the backbone” of its electricity production, has helped shelter the country compared with others from soaring oil and gas costs, but it is far from immune.Sommaruga believes the Swiss have been woken up to a need to wean themselves off fossil fuels by the European power crisis since Russia’s invasion of Ukraine, and by the risk of energy rationing in a worst-case scenario this winter.She wants to achieve greater energy security by tapping the Alpine confederation’s unique geography to develop solar power and expand hydropower — and she is trying to drag along local interests worried about the landscape and the ecological impact.A successful pivot to a clean, independent energy supply, which the government is pursuing under its “Energy Strategy 2050″, promises to underpin Switzerland’s position as a high-end economy at the heart of Europe with a safe-haven currency.”If we can use solar power and hydropower together, this I think is really the ‘dream team’ of Swiss energy production,” Sommaruga told Reuters in an interview.The “if” is significant: Implementing change is not easy as Switzerland’s system of direct democracy means projects can be blocked at a local level. It has taken years just to get approval to raise the wall of one existing dam, for example.Last week, Sommaruga achieved some success. Parliament passed legislation on the compulsory construction of solar panels on new buildings. But it was so full of caveats that Sommaruga expects about 70% of buildings will be exempt.The legislation also facilitates the approval of large solar projects in the mountains, which can qualify for state funding, though it is up to the cantons to approve them.’MY HEART BLEEDS’In the southwestern canton of Valais, Switzerland’s potential to harness energy from its own resources is demonstrated by the imposing 285 metre(935 ft)-high Grande Dixence dam, which holds some 400 million cubic metres of water.”That’s enough to supply around 400,000 houses with electricity for a year,” Amédée Murisier, head of hydropower production at energy company Alpiq, said ahead of what he expects to be a “pretty tense” winter.”We are going to store water in the dams for late in the winter to make sure we are not in a tight spot,” added Murisier, speaking next to the vast and almost-full Lac des Dix reservoir that the Grande Dixence dam withholds.Nearby glaciers melted during the hot summer, helping fill the dam’s reservoir, “which environmentally speaking is bad news but for energy supply it’s good news”, Murisier reasoned.Sommaruga said Europe’s energy crisis had made the Swiss “much more aware that we have to have more production and more storage in our country. We have to expand renewable energy.”There are still calls for moderation though, so as not to disrupt biodiversity or blight the picture postcard Swiss Alps.”My heart bleeds when I think of photovoltaic modules in a nature park,” said lawmaker Stefan Mueller-Altermatt of centrist party Die Mitte.Nils Epprecht, managing director at the SES Swiss energy foundation, wants solar power to be pursued within limits that protect nature. He is worried that in its push to replace fossil fuels with renewables, parliament will neglect biodiversity.”The risk is they throw the baby out with the bath water,” he said. But he described last week’s package as “acceptable”. SUPPLY SECURITYTo get through winter, the government is temporarily easing water-use rules to let some hydropower plants boost capacity and is releasing petrol, diesel, heating oil and kerosene from its strategic reserves. Hydropower accounts for some 60% of domestic electricity production, but electricity accounts for only a quarter of all Swiss energy sources, with petroleum products the biggest.The upshot is that while Switzerland’s share of renewables — about a quarter of the total energy supply — puts it ahead of leading European economies like Germany and France, it lags behind Norway and Iceland, data from the Paris-based OECD show.Looking beyond the winter, Sommaruga wants to try to keep power prices down, but her priority is clear: “The most important thing is to have security of supply.”The Swiss have so far dodged much of the cost of living crisis endured by their European neighbours, with inflation running at just 3.3% compared with 10.0% in the euro zone.This is partly thanks to its energy mix, in which gas only accounts for about 15% of total consumption. But Sommaruga stresses there is “no certainty at all” about power supplies this winter.Relatively high incomes and the low weight of energy in the consumer price index (CPI) — just 5% in the Swiss CPI basket compared with over 10% in Germany, according to OECD data — also explain the difference.Another factor is the strong franc, which gives Switzerland some protection against higher import costs, and which Swiss National Bank Governing Board member Andrea Maechler has described as “very strong”. The SNB is on inflation’s case.”We are paid to be worried and to make sure that inflation stays in check,” Maechler said.Christian Schaffner, Executive Director of the Energy Science Center at the Federal Institute of Technology, would like Swiss politicians to show the same zeal in pushing renewables.”We have been too slow, way too slow,” said Schaffner, who coordinated researchers in drawing up a policy brief on moving towards Swiss energy independence.As well as more hydropower, Schaffner would like a boost in wind and solar power. The snow’s reflection in the Alps could allow double-sided photovoltaic units to harvest more energy.”Photovoltaics and wind are among the cheapest ways to produce electricity in the future, especially if we assume natural gas prices stay higher. In that regard, having more photovoltaics in the system should bring down costs,” he said.Hydropower adds flexibility, which allows Murisier to keep the water held by the Grande Dixence dam in reserve.Murisier is also seeking permission to build a new dam below a retreating glacier near Zermatt — a project he describes as part of a broader discussion in Switzerland about “landscape protection versus additional green energy.””I think that discussion will, as always in Switzerland, need compromises from both sides,” he said.”It’s not possible to cover all remaining Alps with hydropower schemes. That would be too much. But certainly in a few selected spots, there is potential. And we need that.” More

The White House said nothing was off the table a day after Opec+ angered Washington with sharp cuts to world oil supply, as it considered responses — including new releases from the US Strategic Petroleum Reserve to contain energy prices. The Opec+ cartel led by Saudi Arabia and Russia on Wednesday agreed to lower production targets by 2mn barrels a day, or roughly 2 per cent of global oil consumption. Oil markets rose further yesterday, with Brent crude reaching $94 a barrel. Brian Deese, director of the White House’s National Economic Council, described the decision as “unnecessary and unwarranted” and said the US was looking at further sales from its strategic stockpile, which has already been drawn down by more than 200mn barrels in the past year. He did not rule out an export ban or limiting exports on petrol and other refined products when asked if the idea was under consideration. “What the president has directed us, and it continues to be the case, is to take nothing off of the table,” Deese said.Opec+’s announced reduction unleashed shockwaves as the oil industry has become increasingly worried over the prospect of curbs on refined oil product exports. Europe’s energy crisis would be made worse by such a move, as the continent imports significant quantities of fuel from the US and is soon to halt all seaborne Russian oil imports.Thanks for reading FirstFT Asia. Let us know your thoughts on today’s newsletter at [email protected] or by replying to this email. — SophiaFive more stories in the news1. EU and Norway agree on ‘joint tools’ to tackle gas crisis Oslo says it will work with Brussels to develop tools aimed at reducing Europe’s high gas prices ahead of a looming energy crisis this winter. Norway replaced Russia as the EU’s biggest supplier of gas after the invasion of Ukraine.Go deeper: Why Germany’s energy package is undermining EU unity2. Xi Jinping cracks down on disloyalty ahead of party congress In the weeks leading up to this month’s Communist party congress, China’s courts have orchestrated a series of high-profile corruption trials of senior cadres from the state’s police and security apparatus, including the former justice minister and the former deputy minister of public security.3. Do Kwon denies prosecutors froze $67mn of crypto assets Seoul law enforcement said yesterday that they had frozen Do Kwon’s bitcoin holdings, but Kwon, co-founder of collapsed crypto operator Terraform Labs, denied the claim. “I don’t know whose funds they’ve frozen, but good for them, hope they use it for good,” he wrote on Twitter.4. BoE says £65bn gilt intervention staved off UK financial ‘spiral’ The central bank defended last week’s intervention in the UK government debt market, saying it stepped in to prevent a £50bn fire sale of gilts that would have taken Britain to the brink of a financial crisis.5. Israel-Lebanon deal on maritime border dispute falters Israel has accused Lebanon of seeking “substantial changes” to a proposed US-brokered deal on the two countries’ maritime border, throwing into doubt hopes of an imminent resolution to a long-running dispute involving a gasfield in the eastern Mediterranean Sea.How well did you keep up with the news this week? Take FirstFT’s quiz to find out.The day aheadEconomic indicators The US and Canada both publish respective September unemployment figures today, and the UK will publish quarterly productivity figures, the Halifax monthly house price index, and the Recruitment & Employment Confederation and KPMG monthly employment report.Corporate earnings JD Wetherspoon releases its fiscal year report today.EU leaders meet in Prague Members of the European Council reconvene in Prague to discuss Russia’s war in Ukraine, the energy crisis, and the economy.Putin’s birthday Russia president Vladimir Putin turns 70 today.What else we’re readingGlobal economy gets gloomy assessment from IMF chief The global economy will feel like it is in recession next year, according to IMF managing director Kristalina Georgieva, with at least two quarters of economic contraction in 2023. The remarks signal that the IMF is set to downgrade its economic forecasts again next week, for the fourth consecutive quarter.Why Big Tech shreds storage devices it could reuse Companies such as Amazon and Microsoft, as well as banks, police and governments, destroy millions of data-storing devices each year in the name of digital security, the Financial Times has learnt. But industry insiders say there is a better option.Best US cities for foreign business, ranked Miami has been ranked the best city in the US for foreign multinationals to do business, in the inaugural Investing in America ranking compiled by the Financial Times and Nikkei. Last year the Florida city pulled in the most foreign direct investment per capita of any place studied.

Why Japan remains the biggest investor in the US Japan has been the biggest foreign investor in the US for three straight years, despite difficulties such as the cost of labour and Joe Biden’s push for domestic manufacturing and supply chains.Investors reap rewards from bets on Musk closing Twitter deal Carl Icahn, Hindenburg Research and Florida-based hedge fund Pentwater Capital Management are among investors who predicted the billionaire would close the deal.Go deeper: Explore the twists and turns of Elon Musk’s Twitter deal as it played out through a series of tweets.Fashion Consider sneakers the footwear equivalent of Facebook: somewhat passé now that they’re pervasively co-opted by baby boomers and billionaires. Millennials and Gen Z are retiring their trainers to revisit formal shoes — even with leisurewear.

Leather Derbies are now worn with denim shorts and ankle socks, as seen on the streets of Paris © Getty Images More

Federal Reserve officials have raised rates five times this year as they try to beat back the worst inflation in 40 years, and the past three moves have been especially rapid. That has prompted Wall Street and policymakers to contemplate when the Fed might start to slow down.Jerome H. Powell, the Fed chair, has signaled that moving less rapidly will be appropriate at some point in the future, though he has declined to put a date on when that might begin. On Thursday, Lisa D. Cook, one of the Fed’s newest governors, echoed that stance, saying that “at some point” the central bank will decide to “slow the pace of increases while we assess the effects of our cumulative tightening on the economy and inflation.”Based on the central bank’s statements and economic projections, markets are betting heavily that the pace will not step down until December. But a debate is beginning to firm up ahead of the central bank’s meeting in early November: Some officials are open to a potential slowdown as soon as the meeting next month, while others believe that the central bank needs to push ahead with very rapid policy adjustments as it races to control inflation.Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said she could potentially support a half-point move at the central bank’s meeting next month. While still a larger increase than in normal times, a half-point move would be less aggressive than the three-quarter-point change the Fed made at each of its last three meetings.Ms. Daly is less aggressive than the majority of her colleagues, favoring one percentage point of further rate increases before the end of the year — less than the at least 1.25 percentage points that most people on the committee view as warranted.“I think we don’t need to signal that we’re resolute anymore; I think people really understand that we’re resolute,” Ms. Daly said during an interview with The New York Times this week. “I am very open to stepping down the pace. But the data will help me determine whether I’m supportive of 75 followed by 25, or whether I’m supportive of 50 followed by 50.”Christopher Waller, a Fed governor, said on Thursday that inflation had not shaped up the way he would want “to support a slower pace of rate hikes” than the Fed had previously projected, and argued that a few more data points were unlikely to change his mind.Inflation F.A.Q.Card 1 of 5What is inflation? More

Top officials at the Federal Reserve on Thursday pushed back on speculation that the US central bank will soon pause its aggressive monetary tightening campaign, emphasising instead the need for further interest rate increases.In her first public remarks since becoming a governor on the Federal Open Market Committee, Lisa Cook described inflation as a “near- and long-term threat” and said it was “critical” for the Federal Reserve to “prevent an inflationary psychology from taking hold”.“In our current economy, with a very strong labour market and inflation far above our goal, I believe a risk-management approach requires a strong focus on taming inflation,” she said at an event hosted by the Peterson Institute for International Economics, a Washington-based think-tank. “Aside from the immediate effect of higher prices on households and businesses, the longer it persists and the more people come to expect it, the greater the risks of elevated inflation becoming entrenched,” she added.Separately, another Fed governor Christopher Waller on Thursday said incoming data suggest inflation is “far from the FOMC’s goal and not likely to fall quickly”.“Though there are additional data to come, in my view, we haven’t yet made meaningful progress on inflation and until that progress is both meaningful and persistent, I support continued rate increases, along with ongoing reductions in the Fed’s balance sheet,” he said at an event hosted by the University of Kentucky.“We currently do not face a trade-off between our employment objective and our inflation objective, so monetary policy can and must be used aggressively to bring down inflation,” he added.The officials’ comments come as financial markets have whipsawed in an effort to digest both gloomier growth prospects globally, but also emerging signs of stress. Some investors and economists have speculated the Fed will need to back off from its plans to tighten monetary policy as a result and either move far more slowly in the coming months or pause altogether.The Fed is debating whether to deliver a fourth consecutive interest rate increase at its upcoming meeting in November, a move that would lift the federal funds rate to 3.75 per cent to 4 per cent. Most officials forecast the benchmark policy rate reaching 4.4 per cent by year-end and 4.6 per cent in early 2023.While the November decision will hinge in part on incoming jobs data, due out on Friday, and the next inflation report set to be released next week, Fed officials have explicitly cautioned that the economic circumstances do not yet warrant the central bank pivoting from its ultra-aggressive approach. Waller on Thursday said he does not expect his view of inflation, the labour market and the overall trajectory of the economy to be altered materially by the incoming data, and highlighted that “most policymakers will feel the same way”.Also on Thursday, Neel Kashkari, president of the Minneapolis Fed, said the central bank was “quite a ways away” from halting its interest rate increase — a message also reiterated this week by the Atlanta Fed’s Raphael Bostic and Mary Daly of the central bank’s San Francisco branch.Cook, who is the first black woman to serve as a Fed governor, on Thursday backed the central bank’s decision to “front-load” its rate rises — which she said has helped to more rapidly crimp demand. Restoring price stability would not only likely require “ongoing rate hikes”, she continued, but also keeping interest rates at a level that restrain the economy “for some time”. During a discussion following her remarks, Cook was asked about liquidity in the market for US government debt, which traders have warned has been strained. The Treasury market, she said, is “functioning well” with “large volumes of trades being executed”.

Waller said he was “confused” by market speculation that the Fed would slow its rate rises or halt them earlier because of financial stability concerns, saying markets were “operating effectively”.While Cook emphasised that the economic effects caused by changes in monetary policy works with “long and variable lags”, she said any policy adjustments should hinge on “whether and when we see inflation actually falling in the data, rather than just in forecasts”.At a separate event on Thursday, Charles Evans, president of the Chicago Fed, said the “momentum” in core inflation, which strips out volatile items such as food and energy, is what is most concerning to the central bank.Economists have warned that waiting until realised inflation falls would all but ensure the Fed overtightens and causes a recession — something chair Jay Powell recently said could not be ruled out.Cook said: “Although most forecasts see considerable progress on inflation in coming years, it is important to consider whether inflation dynamics may have changed in a persistent way, making our forecasts even more uncertain.” More

“Inflation is far from the FOMC’s goal and not likely to fall quickly,” Waller said, referring to the Federal Open Market Committee at the U.S. central bank that sets interest rates for the world’s biggest economy. “This is not the inflation outcome I am looking for to support a slower pace of rate hikes or a lower terminal policy rate” than that projected by policymakers last month.The Fed has lifted its policy rate faster this year than at any time since the 1980s, delivering three straight 75-basis-point rate hikes through last month to bring the benchmark for short-term borrowing costs to a 3%-3.25% range. Policymakers last month penciled another 100 to 125 basis points of rate hikes this year. A monthly jobs report and two more reads on inflation will arrive before the Fed’s next meeting in November, too little data in Waller’s view to significantly alter his view that labor markets are tight and inflation is too high, he said, “and I expect most policymakers will feel the same way.” Investors widely expect the Fed to deliver a fourth 75-basis-point rate hike next month, and Waller said little to change that perception. “I imagine we will have a very thoughtful discussion about the pace of tightening at our next meeting,” he said, noting that there has been little progress on inflation and “until that progress is both meaningful and persistent, I support continued rate increases, along with ongoing reductions in the Fed’s balance sheet, to help restrain aggregate demand.”Waller also dismissed speculation the Fed might slow or pause rate hikes to address financial stability concerns that may emerge amid spiking market volatility since the Fed last month signaled its more aggressive rate hike path. “Let me be clear that this is not something I’m considering or believe to be a very likely development,” Waller said in remarks prepared for delivery at the University of Kentucky in Lexington, Ky. More

In normal times, strong job gains and rising wages would be considered a good thing. But these days, they’re exactly what the U.S. economy doesn’t need.
Economists surveyed by Dow Jones expect the report will show that payrolls increased 275,000 in September, while the unemployment rate held at 3.7%.
An upside surprise could mean a more aggressive Fed that could roil markets.
Along with the headline job number, investors will be watching wage growth closely.

A worker takes a panini sandwich off a grill at a restaurant in the Union Market district in Washington, D.C., on Tuesday, Aug. 30, 2022.
Al Drago | Bloomberg | Getty Images

Investors are closely watching the nonfarm payrolls report due out Friday, but not for the usual reasons.
In normal times, strong job gains and rising wages would be considered a good thing. But these days, they’re exactly what the U.S. economy doesn’t need as policymakers try to beat back an inflation problem that just won’t seem to go away.

“Bad news equals good news, good news equals bad news,” Vincent Reinhart, chief economist at Dreyfus-Mellon, said in describing investor sentiment heading into the key Bureau of Labor Statistics employment count. “Pretty much uniformly what is dominant in investors’ concerns is the Fed tightening. When they get bad news on the economy, that means the Fed is going to tighten less.”
Economists surveyed by Dow Jones expect the report, due out Friday at 8:30 a.m. ET, will show that payrolls increased 275,000 in September, while the unemployment rate held at 3.7%. At least as important, estimates are for average hourly earnings to increase 0.3% month over month and 5.1% from a year ago. The latter number would be slightly below the August report.

Any deviation above that could signal that the Federal Reserve needs to get even more aggressive on inflation, meaning higher interest rates. Lower numbers, conversely, might provide at least a glimmer of hope that cost of living increases are abating.
Wall Street forecasters were split on which way the surprise might come, with most around the consensus. Citigroup, for instance, is looking for a gain of 265,000, while Nomura expects 285,000.

In search of middle ground

For investors, the focus will be keen on what wages are saying about the state of the labor market.

Even hitting the consensus 5.1% increase means wage pressure “is still high. Markets might want to reconsider a sanguine view of what the Fed plans to do,” said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings. “The Fed is planning an aggressive stance. A hotter wage reading would just confirm their position.”

Policymakers essentially are looking for Goldilocks — trying to find monetary policy that is restrictive enough to bring down prices while not so tight that it drags the economy into a steep recession.
Comments in recent days indicate that officials still consider slowing inflation as paramount and are willing to sacrifice economic growth to make that happen.
“I want Americans to earn more money. I want families to have more money to put food on the table. But it’s got to be consistent with a stable economy, an economy of 2% growth” in inflation, Minneapolis Fed President Neel Kashkari said Thursday during a Q&A session at a conference. “Wage growth is higher than you would expect for an economy delivering 2% inflation. So that gives me some concern.”
Likewise, Atlanta Fed President Raphael Bostic on Wednesday said he thinks the inflation battle “is likely still in the early days” and cited a still-tight labor market as evidence. Governor Lisa Cook said Thursday that she still sees inflation running too high and expects “ongoing rate hikes” to be necessary.
However, worries have shifted in the market lately over the Fed doing too much rather than too little, as some indicators in recent days have pointed to some loosening of inflation pressures.
The Institute for Supply Management on Wednesday reported that its September survey showed expectations for prices around their lowest levels since the early days of the pandemic.
Recent BLS data indicated that prices for long-distance truck deliveries fell 1.5% in August and are well off their January record peak (though still up nearly 22% from a year ago).
Finally, outplacement firm Challenger, Gray & Christmas reported Thursday that job cuts surged 46.4% in September from a month ago (though they are at their lowest year-to-date level since the firm began tracking the data in 1993). Also, the BLS reported Tuesday that job openings fell by 1.1 million in August.

Correcting a mistake

Still, the Fed is likely to keep pushing, with chances rising that the economy enters into recession if not this year then in 2023.
“The Fed’s mistake is already made i.e. not moving in advance of inflation rising. So it has to double-down if it’s going to deal with the inflation problem,” Reinhart said. “Yes, recession is inevitable. Yes, the Fed’s policy is probably going to make it worse. But the Fed’s policy mistake was earlier, not now. It’s going to catch up because of it’s previous mistake. Hence, recession is around the corner.”
Even if Friday’s number is weak, the Fed rarely reacts to a single month’s data point.
“The Fed will keep hiking until the labor market cracks. To us this means the Fed is confident that payrolls growth has slowed and unemployment is on an upward trajectory,” Meghan Swiber, rates strategist at Bank of America, said in a client note. In real terms, Swiber said that likely means no change until the economy is actually losing jobs.
There was, however, one instance where the Fed did seem to react to a single data point, or two points more specifically.
In June, the central bank was set to approve a 0.5 percentage point rate increase. But a higher-than-expected consumer price index reading, coupled with elevated inflation expectations in a consumer sentiment survey, pushed policymakers in an 11th-hour move to a 0.75 percentage point move.
That should serve as a reminder on how focused on the Fed is on pure inflation readings, with Friday’s report possibly viewed as tangential, said Shannon Saccocia, chief investment officer at SVB Private Bank.
“I don’t think the Fed is going to pivot or pause or anything of that nature before the end of the year, certainly not because of jobs data,” Saccocia said.
Next week’s CPI reading is likely to be more consequential when it comes to any shift in Fed attitudes, she added.
“Wages are embedded in the cost structure now, and that’s not going to change. They’re probably going to put more emphasis on food and housing prices in terms of their areas of interest, because all that can happen now [with wages] is we stabilize at current levels,” Saccocia said. “Any sort of lift we got out of this print [Friday] is likely to be temporary, and tempered by the perception that this is all really about CPI.”

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Wall Street stocks extended their losses on Thursday as sentiment faltered following an upbeat start to the new month.The S&P 500 ended the session down 1 per cent in New York after the broad index closed down 0.2 per cent on Wednesday, a decline that put the brakes on the strongest two-day advance for US equities in more than two years. The technology-heavy Nasdaq Composite fell 0.7 per cent.In Toronto, the S&P/TSX Composite fell 1.4 per cent after the Bank of Canada’s governor said in a speech that there was “more to be done” to fight inflation, kindling expectations of a sixth consecutive interest rate rise later this month.In Europe, the Stoxx 600 lost 0.6 per cent after the regional gauge closed 1 per cent lower on Wednesday.Equities have sold off broadly in recent months, with last week capping the longest streak of quarterly losses since the 2008 financial crisis. As the US Federal Reserve and other central banks twist the screws on monetary policy to curb inflation, the prospect of ever higher borrowing costs has hit companies’ valuations.At the same time, fears have intensified that the Fed and its peers will raise interest rates into a protracted slowdown, squeezing demand to the extent that they induce a global recession — and exacerbating the threat to businesses’ financial health.Against that backdrop, investors have closely scrutinised economic data releases for clues about how much further rate-setters can hoist borrowing costs in the face of dwindling growth.A report on Thursday offered fresh figures on the state of US unemployment, with first-time jobless claims coming in at 219,000 for the week ending October 1 — higher than the expected figure of 203,000 and up from 190,000 a week earlier.That weaker than forecast picture came hot on the heels of a disappointing Tuesday release on job openings in the world’s largest economy, which had eased concerns over interest rate rises and, in turn, fuelled a rally in Wall Street equities.The widely followed monthly jobs report from the US labour department is due on Friday. The temperature of the jobs market is seen as a crucial influence on Fed decision-making, with signs of loosening inspiring hope that the central bank will act with less vigour to contain inflation.Government debt markets came under pressure on Thursday after days of sharp swings. The yield on the 10-year US Treasury note added 0.05 percentage points to 3.81 per cent, while the policy-sensitive two-year yield rose 0.09 percentage points to 4.24 per cent.Moves were more pronounced in UK bonds, with the yield on the 10-year gilt adding 0.15 percentage points to 4.19 per cent as its price fell. The gilt market was last week gripped by crisis as the new British government’s “mini” Budget sparked fears over the extent of borrowing required to fund extensive tax cuts.In currencies, the dollar added 1 per cent against a basket of six peers, extending gains from the previous session. The pound slid 1.45 per cent to $1.116 against the greenback, but continued to trade well above the record low of $1.035 that it tumbled to after UK chancellor Kwasi Kwarteng announced his fiscal plans on September 23.“[We] think it’s too early to call a peak in Fed hawkishness or a top in the greenback,” said Mark Haefele at UBS. “The number of job openings in the US remains much higher than those unemployed, while the latest core personal consumption expenditure price index showed that inflation is still elevated.“Fed officials, including chair Jerome Powell, have stressed that the central bank’s job is not yet done.” More