Key Highlights

● The Fed left policy unchanged but with a hawkish tilt.

● Advance third-quarter GDP and September PCE data are due.

● The PCE report is the Fed's preferred inflation gauge.

● A trade deficit reading could complicate the GDP picture.

The Federal Reserve kept its options open. Now the data has to do the talking, as the government is set to release its advance estimate of third-quarter GDP along with September personal income, spending and PCE inflation figures, a one-two punch that could shape how policymakers approach their December meeting.

The Fed left its benchmark rate range unchanged in a 10-2 vote, but the decision was far from dovish, with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting in favor of a hike, and market odds of a December increase rising after the meeting.

A Fed That Sounds Ready

The Fed's statement painted a picture of a strong economy, saying economic activity is expanding at a strong pace and inflation remains elevated, with Chair Kevin Warsh reinforcing that tone, saying the Fed has made clear its willingness and readiness to act.

Expectations for growth are high, with the Atlanta Fed's GDPNow model pointing to a strong third quarter, its strongest reading in a year, while a wider-than-expected trade deficit added a wrinkle that could trim the headline number.

Why PCE Is the Key Inflation Gauge

The personal consumption expenditures price index is the Fed's preferred inflation measure, and with the statement saying inflation remains elevated, a hot September reading would add pressure to act in December, while a cooler print could give officials room to wait.

Oil prices are another concern, with crude settling back above $100 a barrel, which threatens to keep energy costs elevated, and bond markets are already moving, with long-dated Treasury yields climbing sharply.