Fed's Barr and Collins Open Door to October Hike as Flash PMI Hits 5-Year High; Richmond Fed Manufacturing Contracts

Federal Reserve Governor Michael Barr told a housing conference in Chicago that 'further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion,' putting an October rate hike squarely on the table barely a week after the Fed's September 16 quarter-point increase. Boston Fed President Susan Collins separately said she backed the September hike and anticipates one additional increase by December. The hawkish signals landed the same morning S&P Global's flash PMI showed US business activity expanding at its fastest pace in more than five years — the composite index jumped to 58.4 (from 56 in August, beating the 55.2 forecast), with services at a near-five-year high of 58.7 and manufacturing output at 56.7, both the strongest since 2022. The strong-growth-plus-hawkish-Fed combination pushed Treasury yields higher and stocks lower. Separately, the Richmond Fed's regional manufacturing index fell to -2 in September from +4 in August as new orders and shipments both contracted, a discordant regional signal against the national PMI strength. Oil eased as Saudi Arabia restarted its East-West pipeline, running a low-rate test flow toward its 4 million bpd capacity after the September 11 drone attack shut it down; Brent dipped over $2 to a two-week low near $98 and WTI fell below $92 on the news, though full pipeline restoration was still described as weeks away.