Officials Weigh In On The Economy

Federal Reserve Chairman Jerome Powell delivered a speech to Sweden’s Riksbank on Tuesday, emphasizing the need to be free of political influence. 💬

He’s been consistent in his messaging that the Fed needs to tackle high inflation. However, he reiterated in today’s message that achieving the central bank’s goal will require “tough decisions” that are likely to be politically unpopular.

This underscores the persistent problem that the Fed is facing. For inflation to come down, it must slow the economy. But a slower economy and lower asset prices, specifically the housing market, will also raise unemployment. This puts politicians in a tough spot and often causes them to take actions that flow counter to the Fed’s efforts.

Powell recognizes this and likely used today’s message to continue signaling to the market that he’s staying the course, even when things get difficult. Or more specifically, even if politicians look to influence the central bank in one way or another. 🧭

Meanwhile, officials from the World Bank cut their global economic forecast for 2023 again. It now sits at 1.7%, down from their 3% estimate last June. 🔻

Their comments further emphasized the need to tackle inflation and noted that the U.S., Eurozone, and China are all undergoing a period of pronounced weakness. This led to the headline comment that the global economy is “perilously close to falling into recession.” 

If they’re correct in their forecast, governments and individuals will have to adjust to weather the storm…although we already see signs of that. ⚠️

In the U.S., 46% of credit card holders now carry a balance as rates hit record highs. And in France, the government is reforming its entitlement programs by raising the retirement age to 64.

In addition to this commentary, investors are awaiting U.S. bank earnings on Friday. This earnings season, they’ll analyze how well companies are faring in the current environment and what they expect in the year ahead. 📆

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Inflation Checkup Before FOMC Decision

Tomorrow, the Federal Reserve will make its last interest rate decision for 2023 and update its economic projections. With the market increasing its probability of rate cuts throughout the last few months, it will be a closely watched and discussed event. 👀

We’ll get producer prices tomorrow morning, but today’s focus was on the consumer price index.

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Market Looks Past CPI Report

If it feels like the market is largely finished obsessing about inflation data, it’s because it essentially is. Unless there’s a significant pick up in the core inflation metrics the Fed is watching closely, the market seems set on rates staying steady at next week’s Federal Reserve meeting.

And August’s consumer price index (CPI) data did little to move the needle. 😴

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Job Market Continues Cooling

The U.S. labor market continues to cool, which is great news for the Federal Reserve and its 2% inflation goal. While we’ll get more employment data in the days ahead, the November Job Openings and Labor Turnover Survey (JOLTs) report was significant.

From a job openings perspective, they fell to their lowest level since March 2021 at 8.79 million. That pushed the ratio of job openings to available workers down to 1.4:1, well off its peak of 2:1, where it sat for most of 2022. 📊

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Economic Updates & The Fed

It was a busy day on the economic front, so let’s recap what you missed. 👇

First, we’ll start with the Federal Reserve’s interest rate decision. The central bank left rates unchanged after pausing at its September meeting, largely as expected.

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