Macroeconomics: The Day Ahead for 29 October 2026

A very busy day for data and events vies with the conflicting signals from the conflicts in the Middle East and Ukraine, with continued attacks on shipping in the Persian Gulf and on infrastructure in the Arabian Peninsula, along with talk of (possible) further negotiations and the threat of renewed escalation in Iran after next week’s US mid-term elections. There are the Fed’s rate decision, UK Budget, results from Alphabet, Microsoft and Samsung Electronics and Swedish GDP to digest, while ahead lie the ECB policy meeting, US advance Q3 GDP, monthly Personal Income & PCE and weekly jobless claims, along with earnings from Amazon, Caterpillar, Eli Lilly, FedEx, Intel and Sandisk amongst others, ahead of tonight’s BoJ policy meeting. While volatility has eased somewhat from recent peaks, event risk remains very high and further choppy trade appears likely to continue.

U.S. GDP, PCE and the Fed

US Q3 GDP is expected to accelerate to 3.2% SAAR from an H1 average of 2.4%, paced by AI-related equipment spending (seen at or above the H1 pace of 14.5%) and Construction, as well as solid Personal Consumption (3.4% SAAR vs. Q2 3.8%), but offset by a hefty drag from Net Exports (ca. 3.0 ppts) and a fall in residential investment, as high mortgage rates and affordability challenges weigh. A close eye will also be kept on productivity, given that accelerated growth would imply somewhat less pressure on the Fed to hike rates.

Monthly Personal Income and Consumption are seen posting solid gains of 0.3% and 0.6% m/m respectively, with the headline PCE deflator forecast to rise 0.6% m/m to push the y/y rate up to 3.6%, with core seen rising 0.3% m/m to edge the y/y rate up to 3.1% (with any overshoot on the latter likely to stymie the recent fall in UST yields).

All of this would have more than justified a further Fed rate hike yesterday, but as previously noted none of the major central banks are minded signalling a more aggressive rate hike trajectory. That said, veteran Fed watchers will note that, in days of yore before press conferences and associated transparency became the norm, the fact that there was one dissent from a Fed governor (Cook) and one from a regional Fed president (Hammack) offers a strong (likely stage-managed) implicit signal of a rate hike in December.

The statement and Warsh’s press conference were typically short on policy outlook guidance, though Warsh did announce that the number of FOMC meetings would be reduced by one in 2027, and that there is a discussion about changing balance sheet (reduction) policy, both of which will likely contribute to a larger risk premium in US Treasury yields, given the implicit rise in policy uncertainty.

ECB: Lagarde Departure and Bond Yield Focus

That run of US statistics may well upstage the ECB rate decision and press conference, which is expected to see the ECB hold rates, though the announcement that Lagarde will be standing down early on 7 February 2027 will likely be a hefty distraction from policy messaging.

That said, while the volatility of energy and other commodity prices will ensure that the ECB offers no strong guidance on a December rate hike, there will be a lot of focus on the extent to which the now frequent references from ECB speakers to the rise in bond yields easing the pressure for the ECB to hike rates feature in the statement and/or press conference.

Markets will also focus on whether the ECB remains very dismissive of any intervention to curb the widening of French bond spreads.

BoJ: Inflation Target and Policy Outlook

As for tomorrow’s BoJ policy meeting, no change in its key policy rate is expected, but the focus will be on whether Ueda confirms that the target of returning underlying CPI to its 2.0% target has been met, and that the BoJ now needs to be focussed on not allowing inflation to overshoot. That would cement expectations of a December rate hike, and effectively leave the door open to a further rate hike(s) thereafter.

It will also be interesting to note what is said in regard to the performance of the JPY, which has stabilised in the middle of this year’s trading range vs. the USD, but could regain some of its former safe haven status in the event of a more pronounced bout of market/financial instability.

Also of note will be whether there is any dissent about whether underlying inflation has reached its target, most likely from Asada, whose dissent on the September rate hike was based on the continued risk of an undershoot, while Sato’s dissent was more about the timing of the rate hike.

Otherwise, the focus will be on whether there is any shift in the BoJ’s description of the risks to inflation, which in September it continued to suggest were to the upside of its forecasts, and the extent to which it emphasises that past rate hikes will, or are starting to, ‘anchor’ inflation, the latter implying a lower trajectory for rates than if it still emphasises upside risks relative to its updated set of forecasts.