Economic Review 11 September

At the October meeting, the U.S. Federal Reserve Open Market Committee voted to keep the Fed funds policy rate unchanged at the current range of 3.75-4.00%. In a 10-2 vote, there were dissents from governors Cook and Hammack, who each preferred a rate hike of a quarter-point.

The formal statement remained brief, upgrading economic activity from “solid” to “strong”. Last month’s comment about returning to target faster was tweaked to include the “accumulation of more information” to help decide the policy stance. In terms of inflation, it remained “elevated,” and job gains have “kept pace with the workforce.”

Economic data included continued strength in manufacturing and services PMI data, even though down from prior levels, and continued high inflation pressure readings. Housing data was weak, seen in lower housing starts and readings of homebuilder sentiment. Sentiment was little changed, although it continued to hover at multi-decade trough levels.

Equities were mixed around the world, with gains in U.S. small cap as a bright spot, offset by declines in some AI names and foreign equities. Bonds fared positively as interest rates continued to pull back from recent highs. Commodities were mixed, with higher energy along with Middle East tensions continuing.