Cautious optimism hovers over US economy

Economic outlook in the US warrants cautious optimism as inflation eases and labor market cools but remains resilient. Now, eyes are locked on the November Federal Open Market Committee (FOMC) meeting and the presidential election.

The US economy shows resilience, navigating through years of boom-and-bust cycles. Financial markets have been bracing for a slowdown, but fears of recession – estimated at 30% probability over the past year – have not materialized.

Revised second quarter real gross domestic product growth showed a still robust economy, chiefly boosted by consumer spending. Looking ahead, expansion is seen to continue at a moderate pace, with headwinds like tighter financial conditions and ongoing global geopolitical uncertainties weighing on performance.

On prices and the Fed’s pace

The US Personal Consumption Expenditures (PCE) price index, the preferred inflation gauge of the US Federal Reserve (Fed), came in lower than expected at 2.2% in August, down from 2.5% in July. Excluding volatile food and energy costs, the core PCE price index edged up from 2.6% to 2.7%.

These suggest that inflation is gradually approaching the Fed’s 2% target and may continue its easing trend. Yet, the uptick in the core measure supports the case for the Fed to take a gradual pace of interest rate cuts moving forward.

In a widely anticipated move, the Fed delivered an outsized 50-basis-point (bp) rate cut last month to kick off its easing cycle.

The debate now centers on the size of the rate cut at the upcoming November 6-7 meeting, which follows the US presidential elections on November 5. Market players price in two additional 25bp cut by yearend and another total 100 bps by 2025.

Click here to read our take on the US elections.

Fed officials’ recent statements indicate modest rate reductions ahead, with policymakers seeing inflation near their target and focusing on protecting the jobs market.

Benchmark dollar index to weaken

The benchmark US Dollar Index (DXY) recently appreciated, reaching a two-month high of 103.59 as of October 16. Next month’s elections, strong economic indicators, and expectations of more Fed rate cuts in 2024 continue to play a key role in the dollar’s performance.

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DOMINIQUE “NICA” RAVELAS is a Markets Research Analyst at Metrobank’s Trust Banking Group, specializing in offshore macroeconomic research. Formerly a sales trader under Luzon International Sales Desk. She holds a bachelor’s degree in business administration major in Financial Management from Far Eastern University-Makati where she was awarded as one of the Top Outstanding Senior Students (TOSS). She is also a Certified UITF Sales Person (CUSP). Beyond her academic and professional pursuits, Nica enjoys shopping, travelling, and watching sunsets by the beach.


ANNA DOMINIQUE CUDIA, MBA, CSS, is the Head of Markets Research at Metrobank’s Trust Banking Group, spearheading the generation and presentation of financial markets insights to internal and external clients. She used to be with Metrobank’s Investor Relations, where she brought in international awards and took part in various multi-billion peso and dollar capital raising activities. She holds a Master of Business Administration (Finance) degree, with distinction, from the University of London, and industry certifications in finance. She is a naturally curious person and likes to travel here and abroad.