Dominique and Antonio explore expectations for upcoming Federal Reserve policy alongside the economic and geopolitical implications of sticky inflation, upcoming midterm elections, and Middle East tensions. They analyse the unusual conundrum of persistent inflation occurring alongside wage disinflation and an ongoing productivity boom, as well as consumer resilience supported by stock market wealth effects and falling savings rates despite contracting real incomes. While the Fed is expected to remain on hold next week as it pursues a gradual “recalibration,” focus shifts to whether persistent price pressures will prompt a 25-basis-point rate hike in December and a dot plot projecting further tightening next year. Dominique notes that potential congressional flips will not immediately constrain executive foreign policy in the Middle East, and he maintains that US economic resilience is likely to persist over the next couple of quarters.
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