The coming week features a busy data calendar for US markets. The final inflation and employment figures to be released ahead of the Fed's October 28 interest rate decision will shape expectations regarding the policy path. Here are the week's highlights and what this data means for the market.

The ADP weekly employment change data, due on Tuesday, will provide the first signal regarding the pace of hiring in the private sector. During the four-week period ending September 19, private-sector employment rose by an average of 23,750 per week—a reading above the 20,000 level seen in the previous period. This data relies on a different methodology than the official monthly employment report and does not, on its own, indicate a robust labor market. However, it does show that layoffs remain under control and hiring has not come to a complete halt.

September CPI data, to be released on Wednesday, is the week's most critical highlight. Market expectations point to headline inflation rising from 3.4% to a range of 3.6%–3.7% on an annual basis. This increase is expected to stem largely from record-high gasoline prices. Meanwhile, core inflation is projected to remain flat at 2.4%. Core inflation will be the key figure capable of shifting the probabilities surrounding the Fed's interest rate decision; the Cleveland Fed's nowcast model points to levels of 3.60% for headline inflation and 2.39% for core inflation.

PPI data, due on Thursday, will reveal the trend of pressure on producer prices. In August, the PPI came in at 5.4% year-on-year, exceeding expectations. A reading above expectations implies higher costs for businesses, and it is possible that some of these costs could be passed on to consumers.

The initial jobless claims data, set to be released on the same day, serves as a key indicator of the trend in layoffs. For the week ending October 3, claims fell to 197,000, remaining below the 200,000 mark for the fourth consecutive week. This suggests that the labor market is not yet showing signs of significant deterioration.

The final major highlight of the week is the speech Fed Governor Kevin Warsh is scheduled to deliver on October 16 in Bangkok during the IMF meetings. This address will mark the last public statement by a Fed official prior to the interest rate decision. The market will closely monitor the signals Warsh provides regarding the outlook for inflation and employment.

The market is currently pricing in an approximately 82% probability that interest rates will remain unchanged in October. The upcoming data will determine whether this expectation holds firm or shifts. Surprises in the CPI and PPI figures could directly influence interest rate expectations and the direction of risk assets. The week's developments will serve as a crucial reference point leading up to the Fed's decision on October 28.

This article does not constitute investment advice.
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