We break down timely topics, centered on the major economic events around the world and their impacts to financial markets, in order to help you simplify client conversations around important investing decisions.
The FOMC raised the fed funds rate by 75 basis points for a third consecutive meeting in September and projected even more tightening ahead than previously expected. Housing data showed a further surge in multifamily housing starts and the slowest pace for existing home sales since the Covid lockdowns.
The core CPI upside surprise for August highlighted the continued cost pressures across the economy as well as the long road back to a normal price environment. The Fed pushed through another 75 basis point rate hike in September while signaling further aggressive tightening ahead. But the damage may already be done as cuts in consumer activity and business spending in response to higher rates are expected to weaken growth sharply over 2023.
The FOMC lifted the federal funds target range by 75 basis points for a third straight meeting, to 3.00-3.25 percent. While the post-meeting statement was virtually identical to that put out in July, the committee’s economic projections were updated to show weaker growth, higher inflation, and higher benchmark rates than had been anticipated three months ago.
Inflation slowed in August, but the core rate climbed to a five-month high as service costs sped up. Consumer activity is stalling in response to rising prices as spending activity focuses more on necessities than on discretionary items. Small businesses, meanwhile, had a more optimistic outlook in August compared to July, but remain downbeat about short-run economic prospects.
The economy continues to show signs of slowing with the housing market, which is on the front lines as the Fed raises interest rates, leading the downtrend. Demand remains strong in many industries, however, with payroll gains still far above the long-run average and inflation not in the same ballpark as the Fed’s 2.0 percent goal — likely prompting another outsized rate hike by the Fed this month
Last week’s economic data featured mixed data for service industries, with one survey firmly in expansion and the other firmly in contraction. Additionally, the labor market continues to be tight by any measure and Fed Chair Jerome Powell reiterated the Fed’s commitment to bringing about price stability even at the expense of a weaker economy.
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