The U.S. economy continues to grow above-trend, consumer spending remains strong, and the labor market is tight; however, there are concerns about inflation and rising interest rates which could impact the economy and consumer balance sheets, leading to a gradual softening of the labor market.
The majority of economists polled by Reuters predict that the U.S. Federal Reserve will not raise interest rates again, and they expect the central bank to wait until at least the end of March before cutting them, as the probability of a recession within a year falls to its lowest level since September 2022.
Consumer spending growth is slowing as the economy stabilizes, with consumers prioritizing essential purchases and adjusting their spending habits in response to rising interest rates and financial pressures.
Philadelphia Federal Reserve Bank President Patrick Harker suggests that the central bank may maintain steady interest rates in September and for an extended period of time to allow previous rate hikes to continue lowering inflation.
The US economy is expected to slow in the coming months due to the Federal Reserve's efforts to combat inflation, which may lead to softer consumer spending and sideways movement in the stock market for the rest of the year, according to experts. Additionally, the resumption of student loan payments in October and the American consumer's credit card debt could further dampen consumer spending. Meanwhile, Germany's economy is facing a recession, with falling output and sticky inflation contributing to its contraction this year, making it the only advanced economy to shrink.
The number of job vacancies in the US dropped in July, indicating a cooling labor market that could alleviate inflation, while fewer Americans quit their jobs and consumer confidence in the economy decreased, potentially impacting consumer spending; these trends may lead the Federal Reserve to delay a rate hike in September.
The Federal Reserve is considering raising interest rates again in order to reduce inflation to its targeted levels, as indicated by Fed Governor Michelle W. Bowman, who stated that additional rate increases will likely be needed; however, conflicting economic indicators, such as job growth and wage growth, may complicate the decision-making process.
Consumer spending in the US jumped 0.8% in July, the strongest monthly gain since January, driven by purchases of restaurants, live shows, toys, games, and recreational equipment; however, underlying data suggests that this spending may be on borrowed time.
Consumer prices in the US rose 0.2% from the previous month, and 3.3% annually, indicating persistent high inflation and posing a challenge to the Federal Reserve's efforts to curb it; core prices, which exclude food and energy, also increased 0.2% from the previous month and 4.2% from the previous year.
The latest inflation data suggests that price increases are cooling down, increasing the likelihood that the Federal Reserve will keep interest rates unchanged in their upcoming meeting.
The Federal Reserve's preferred inflation gauge increased slightly in July, suggesting that the fight against inflation may be challenging, but the absence of worse news indicates that officials are likely to maintain interest rates.
U.S. consumer spending increased in July, boosting the economy and reducing recession risks, but the pace is likely unsustainable as households dip into their savings and face potential challenges from student debt repayments and higher borrowing costs.
The U.S. is currently experiencing a prolonged high inflation cycle that is causing significant damage to the purchasing power of the currency, and the recent lower inflation rate is misleading as it ignores the accumulated harm; in order to combat this cycle, the Federal Reserve needs to raise interest rates higher than the inflation rate and reverse its bond purchases.
The US economy grew modestly in July and August, with signs of consumers relying more on borrowing to support spending after depleting their savings, while inflation slowed due to decreasing price pressures in the goods sector, according to the Federal Reserve's Beige Book report.
Mortgage rates have increased over the past week, with the average interest rates for 15-year fixed and 30-year fixed mortgages rising, while the average rate for 5/1 adjustable-rate mortgages declined; the Federal Reserve's efforts to control inflation by raising the federal funds rate may impact mortgage rates, but experts suggest that the markets have already factored in the increase.
The European Central Bank is expected to maintain interest rates on September 14, although nearly half of economists anticipate one more increase this year in an effort to reduce inflation.
The Wall Street Journal reports a notable shift in the stance of Federal Reserve officials regarding interest rates, with some officials now seeing risks as more balanced due to easing inflation and a less overheated labor market, which could impact the timing of future rate hikes. In other news, consumer credit growth slows in July, China and Japan reduce holdings of U.S. Treasury securities to record lows, and Russia's annual inflation rate reached 5.2% in August 2023.
The Consumer Price Index is expected to show an increase in inflation in August, with headline inflation rising to 3.6% and core inflation easing to 4.4%, but the market is accustomed to this trend and the Federal Reserve is unlikely to change its rates at the upcoming meeting.
The Federal Reserve is expected to keep its benchmark overnight interest rate unchanged and delay any rate cuts until at least 2024, according to a Reuters poll of economists, despite some suggesting that another rate hike might be needed to address inflation.
U.S. consumer prices are expected to have increased the most in 14 months in August due to rising gasoline costs, while underlying inflation is forecasted to remain moderate, potentially prompting the Federal Reserve to keep interest rates steady.
Consumer spending in the US has supported the economy despite concerns of a recession, but rising interest rates, the resumption of student loan payments, and dwindling savings are predicted to put pressure on consumers and potentially lead to a shrinking of personal consumption.
Cryptocurrency prices remained stable as inflation in the U.S. surpassed economists' expectations, with Bitcoin trading at around $26,100 and Ethereum experiencing a slight dip of 0.5%. The Federal Reserve will consider this report, among other factors, for its upcoming interest rate announcement on September 20. While inflation has decreased since June, it still exceeds the Fed's target of 2% annually. Core inflation, excluding volatile food and energy costs, decreased to 4.3% in August compared to July's 4.7%.
Inflation in the US accelerated for the second consecutive month in August due to rising costs of rent and gasoline, with the consumer price index rising 0.6% from the previous month and 3.7% from the same time last year.
U.S. retail sales rose more than expected in August due to higher gasoline prices, but underlying spending on goods slowed as Americans faced increased inflation and borrowing costs, while the trend in underlying spending on goods was not as robust as initially thought in July. Despite this, overall consumer spending is expected to remain strong, driven by spending on services.
The US Federal Reserve is expected to hold interest rates steady in September while leaving the door open for possible rate hikes in the future, as it tackles inflation and assesses the health of the economy.
The Federal Reserve's restrictive monetary policy, along with declining consumer savings, tightening lending standards, and increasing loan delinquencies, indicate that the economy is transitioning toward a recession, with the effectiveness of monetary policy being felt with a lag time of 11-12 months. Additionally, the end of the student debt repayment moratorium and a potential government shutdown may further negatively impact the economy. Despite this, the Fed continues to push a "higher for longer" theme regarding interest rates, despite inflation already being defeated.
A survey conducted by Bloomberg shows that most economists expect the Federal Reserve to hold interest rates steady until May and project one additional rate increase this year, although they do not believe the Fed will actually implement another increase.
The Federal Reserve is expected to keep interest rates unchanged at its meeting this week, but investors will be paying close attention to any indications of future rate increases as the central bank continues its fight against inflation.
The Federal Reserve is expected to keep interest rates steady and signal that it is done raising rates for this economic cycle, as the bond market indicates that inflation trends are moving in the right direction.
Mortgage rates have experienced fluctuations over the past week, with 15-year fixed rates decreasing and 30-year fixed rates increasing, while the average rate for 5/1 adjustable-rate mortgages slightly decreased; experts predict that the Federal Reserve will not raise rates during its September meeting, but if inflation data exceeds expectations, mortgage rates could continue to rise in 2023.
The U.S. Federal Reserve kept interest rates steady but left room for potential rate hikes, as they see progress in fighting inflation and aim to bring it down to the target level of 2 percent; however, officials projected a higher growth rate of 2.1 percent for this year and suggested that core inflation will hit 3.7 percent this year before falling in 2024 and reaching the target range by 2026.
The Federal Reserve has indicated that interest rates will remain "higher for longer," potentially for at least three more years, in order to sustain economic growth and combat inflation.
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