Key Highlights

● Brent crude climbed to $113.17, its highest since May 4.

● Initial jobless claims fell to 194,000, the fewest in about three months.

● The 10-year yield closed below a key threshold for the first time since September 22.

● The Fed decision is due October 28, with GDP and PCE data the next day.

Federal Reserve Chair Kevin Warsh and his colleagues meet on October 27 and 28 with a crowded set of crosscurrents to weigh. On Thursday, October 22, the central bank was silent, in its customary blackout period, while markets delivered a series of signals that point in different directions.

The Fed raised interest rates in September, its only hike this year. Markets now see only a small chance of another increase next week, though reports said traders expect about one more hike before year-end.

Oil, inflation and a firm job market

The most obvious challenge is energy. Brent crude climbed to $113.17 on Thursday, its highest since May 4, after Houthi attacks in Saudi Arabia struck Dammam airport and an Aramco oil field. A media report said US and Israeli militaries have plans to renew strikes on Iran after the November 3 midterm elections.

Companies are feeling it. Procter & Gamble (NYSE:PG) flagged a $1.4 billion after-tax commodity headwind, and executives warned: "Oil at $113 means more is coming in Q3 and Q4." Southwest Airlines (NYSE:LUV) cut its 2026 profit outlook on fuel costs.

The job market gives policymakers little reason to ease. Initial jobless claims fell to 194,000 for the week ended October 17, below the 200,000 expected and the fewest in about three months. Continuing claims rose by 25,000 to 1.728 million.

The Conference Board's Leading Economic Index was unchanged for September, better than the small decline expected.

A bond market that rallied anyway

Despite the inflation risks, Treasuries rallied hard on Thursday. The 10-year yield closed back below a closely watched threshold for the first time since September 22, having hit its highest since April 2002 on October 7. "If oil is about to spark an inflation wave, the bond market hasn't heard about it," one market commentator said.

That rally was driven largely by a flight from stocks. A 5-year inflation-protected Treasury auction, by contrast, was weak.

Stress in AI and abroad

Warsh's Fed also faces new questions about financial stability. AI stocks sold off after Meta Platforms (NASDAQ:META) set 2026 capital spending at $135 billion to $145 billion and posted negative free cash flow, and the cost of insuring Meta's debt hit a record. The Nasdaq Composite sank 694.00 points, its steepest drop since June 5. Nvidia (NASDAQ:NVDA) CEO Jensen Huang said, "The demand of the capital is much greater than the availability of the capital."

Overseas, France's 10-year yield rose above the US yield for the first time since 2013. "With elections not for another six months, France's bond market could remain a source of volatility," one strategist said.

Warsh's own words

Warsh has kept his options open. Speaking at an earlier International Monetary Fund meeting in Bangkok, he said: "I don't prejudge meetings." He also said: "It's a new chapter at the Fed, and we're not in that business anymore."

A packed calendar for the Warsh press conference

The decision lands on October 28, the same day Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and ServiceNow (NYSE:NOW) report earnings. The next day brings third-quarter GDP and September PCE inflation, the Fed's preferred price gauge, plus results from Amazon (NASDAQ:AMZN), Intel (NASDAQ:INTC) and Caterpillar (NYSE:CAT).

Before that, Friday's S&P Global purchasing managers' surveys and final University of Michigan sentiment reading will offer a last look at the economy. Investors will parse Warsh's statement and press conference for clues on whether September's hike will be followed by more.