Today, economists anticipate that the Federal Reserve will maintain its current interest rates when it releases its monetary policy statement at 2:00 PM Eastern Time. According to Briefing.com’s consensus forecast, the Fed funds rate is likely to hold steady at the zero to 0.25% target range, a level that has been in place since 2008. This isn’t surprising given the recent fluctuations in economic data. A look at the market data confirms this expectation. Should Yellen and her team announce an interest rate increase today, it would indeed be a significant shock, as demonstrated by the following analysis of key economic indicators.
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● US durable goods orders continue to decline in September | USA Today
● Business investment in the US remains sluggish during September | Bloomberg
● House prices in the US increased by 5.1% year-over-year in August | CNBC
● UK’s GDP growth in Q3 slowed more than anticipated | Reuters
● Consumer confidence in the US, as measured by the Conference Board, dropped in October | MarketWatch
● Richmond Fed index shows that manufacturing contraction eased in October | DJ
It is widely expected that US economic output will show a marked slowdown in the preliminary estimate of third-quarter GDP set to be released this Thursday (October 29). The extent of this deceleration compared to Q2’s notable 3.9% rise (real seasonally adjusted annual rate) is currently a topic of debate. Projections range from tepid expectations that hint at near stall-speed to a moderate pace that, while still concerning, may be sufficient to quell fears of an impending recession.
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● New home sales in the US decreased in September, nearing a one-year low | Reuters
● Dallas Fed Index: Manufacturing activity has improved, although the general index remains negative | 24/7 Wall St
● A US warship navigates through disputed waters in the South China Sea | CNN
● This week, the Fed engages in pivotal policy discussions | Bloomberg
● Agreement reached between the White House and Congress on budget | WaPo
US stocks led last week in performance among major asset classes, based on a series of proxy ETFs. The Vanguard Total Stock Market ETF (VTI) rose by 1.7% during the five trading days ending October 23, marking the fourth consecutive weekly increase—the longest winning streak in a year. In contrast, other major asset classes displayed a mixed performance, with broadly defined commodities—represented by the iPath Bloomberg Commodity (DJP)—suffering a 2.7% loss, the largest weekly decline since August.
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● Manufacturing PMI in the US rises to a five-month high in October | MarketWatch
● Business climate data from Germany by Ifo shows a slight increase in October | Ifo
● China reduces its policy rate—a cautionary signal for the global economy? | The Guardian
● Japan continues to struggle despite years of monetary stimulus | NY Times
● Russia’s activities near US undersea cables raise suspicions | Reuters
● ECB’s Draghi in search of insights regarding a stimulus plan this week | Bloomberg
● America’s Bank: The Epic Struggle to Create the Federal Reserve
By Roger Lowenstein
Essay by the author via The Wall Street Journal
Distrust in the central bank is a distinctly American phenomenon. According to public opinion surveys, few federal agencies rank lower than the Federal Reserve, second only to the Internal Revenue Service. The left accuses the Fed of being too allied with banks, while the right contends that it is laying the groundwork for significant inflation.
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Could the recent slowdown in US manufacturing finally be over? Today’s flash estimate of the Markit purchasing managers’ index (PMI) indicates an uptick to 54.0 in October, rising from 53.1 the previous month. This marks a five-month high, creating a wider gap from the neutral 50.0 benchmark. However, it’s too soon to celebrate or assume that the US economy is primed for a robust recovery in the coming months. Today’s figures suggest moderate growth in the manufacturing sector, following a period of decline.
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After experiencing a rough couple of months marked by a steep decline in US equity prices, the stock market has recently recouped many of the losses incurred following China’s surprising currency devaluation on August 11, which initiated a sell-off of risk assets across the globe. While it remains uncertain if the worst is behind us, the current outlook for US equities is significantly brighter compared to the turmoil experienced from late August to the end of September. The pressing question remains: is this resurgence in the market a genuine reflection of improved conditions ahead, or merely a diversion from recognizing a persisting deterioration in trends?
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● The Conference Board’s Leading Economic Index for the US dipped in September | WSJ
● US jobless claims have risen slightly but remain near a multi-decade low | MarketWatch
● Growth in the US fell below average in September | Chicago Fed
● Existing home sales in the US increased in September, nearing an 8-year high | Bloomberg
● Consumer expectations in the US weakened, according to a Bloomberg survey | Bloomberg
● The ECB signals potential additional stimulus for the Eurozone in December | The Economist
● Eurozone Composite PMI has risen to a two-month high in October | Markit