Israel-Hamas War Elevates Risk as Fed Digests Inflation, Jobs DataIsrael-HamasWarElevatesRiskasFedDigestsInflation,JobsData

Markets are assessing the unfolding impact of the war in Gaza following last weekend’s deadly attack on Israel. Regional conflicts in eastern Europe and the Middle East have contributed to an uncertain global outlook and complicated the path for monetary policy, particularly with higher oil prices now threatening to lift inflation while denting economic growth. In the US, the Fed will attempt to strike a balance between geopolitical risks and data showing a faster-than-expected rise in consumer and wholesale prices in September, driven by higher fuel and shelter costs. The consumer price index held steady on a year-over-year basis, however, climbing 3.7%. The mixed bag of inflation data came on the heels of a surprise gain of 336,000 jobs last month, nearly double the consensus estimate and elevating inflation risks.

Remarks from Fed officials this week suggest that policymakers may look past recent swings in energy and food prices, instead focusing on weakening growth prospects, higher Treasury yields, and a deceleration in underlying inflation. In a speech to the National Association for Business Economics on Monday, Fed Vice Chair Philip Jefferson said he would “remain cognizant of the tightening in financial conditions” as the central bank determines whether additional rate hikes are needed. Greg Peters, PGIM Fixed Income Co-Chief Investment Officer, joined Bloomberg TV to discuss the investment implications of recent geopolitical tensions, economic shocks and market volatility.