Macro Briefing: 23 September 2024

The House will vote on a new three-month stopgap funding bill to avoid a partial US government shutdown that would start Oct. 1 without Congressional action. Even if the bill is enacted, the short time frame set up another high-stakes battle just ahead of the holidays.
The latest escalation in the conflict between Israel and Lebanon’s Hezbollah raises the risk of an all-out war over the Lebanese-Israeli border. “With the region on the brink of an imminent catastrophe, it cannot be overstated enough: there is NO military solution that will make either side safer,” United Nations’ special coordinator for Lebanon, Jeanine Hennis-Plasschaert wrote on X yesterday.
Gold prices rose to a new record high on Friday, closing at $2646 an ounce:

Eurozone business activity decreased in September, marking the first decline in seven months, based on PMI survey data. The Eurozone PMI’s “reduction in overall business activity was driven by a deepening downturn in the eurozone manufacturing sector, where production decreased for the eighteenth month running and at the fastest pace in the year-to-date,” reports S&P Global. “Although services business activity continued to rise, the latest expansion was only marginal and the weakest since February.”
China’s central bank announces a rate cut to boost economy. The reduction in one of the bank’s short-term funding rates is “fueling speculation officials are preparing to ramp up efforts to revive growth,” reports Bloomberg. “We believe the risk that China will miss the ‘around 5%’ full-year GDP growth target is on the rise, and thus the urgency for more demand-side easing measures is also increasing,” advise Goldman analysts.
Fed Governor Waller says inflation is falling faster than he expected. “I was a big advocate of large rate hikes when inflation was moving much, much faster than any of us expected,” he said. “I would feel the same way on the downside to protect our credibility of maintaining a 2% inflation target,” he tells CNBC. “If the data starts coming in soft and continues to come in soft, I would be much more willing to be aggressive on rate cuts to get inflation closer to our target.”
Fed funds futures are pricing in another rate cut at the next FOMC policy meeting on Nov. 7. The implied probability is roughly 50/50 for a 1/4-point vs. 1/2 point cut, according to CMEgroup.com.