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Economic commentary

Economic commentary

Consumer inflation downshifts in September

The trend in consumer inflation remains soft even as the ultra-low unemployment rate and improved consumer spending point to tighter labor and product markets. Lower energy costs again held back the consumer price index (CPI) for September. A flat reading for the month kept the 12-month change in the CPI at a low 1.7 percent. Headline inflation readings could continue to swing with energy costs in coming months, especially given the elevated tensions in the Middle East at present. 

Economic commentary

Geopolitical uncertainty abundant

The geopolitical environment has been quite uncertain this year, helping to hold back economic activity. The choppy escalation of trade disputes between the U.S and China has hung over the business sector and helped to decelerate global growth. The Fed, which came into the year expecting further rate hikes, has reversed course with two rate cuts (and more likely on the way) in response to building risks for the economy, while the yield curve has been partially inverted since May – at a minimum suggesting slower growth ahead, if not recession. 

Economic commentary

September Monthly Dashboard: The Fed is easing, but trade and global growth are holding the economy back

The Federal Reserve eased again in September and we project a bit more easing by year-end as trade tensions and weaker global growth likely still hang over the economy. Our baseline outlook projects continued economic growth around trend, with inflation edging slowly higher — helping to keep long-term interest rates from falling further. But there is considerable uncertainty surrounding the path forward stemming from trade volatility – and most recently from domestic political events. 

Economic commentary

Easy does it from the Fed

In line with expectations, the Federal Reserve cut the target range for the federal funds rate by an additional 25 basis points (bps) following the September FOMC meeting. The post-meeting FOMC policy statement cited the weakening global economic backdrop and still tepid inflation readings within the U.S. as impetus for additional policy easing. While mostly unsaid in the statement, the uncertainty caused by volatile financial markets and the further escalation of the trade war with China since the last FOMC meeting in July likely also influenced the decision to add stimulus to the economy. 

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