Heading into this week’s monetary policy meeting, central bankers are armed with a slew of data that paint a mixed picture of the economy.
On the labor market side of the equation, things are looking relatively solid. While the unemployment rate ticked up to 4.2% in September from 4.1% the prior month, it’s been mostly flat for the past year. The number of new hires, however, tumbled last month to 29,000 from August’s 133,000 job gains. Still, monthly hiring has on average been stronger for the first nine months of this year compared to last.
Inflation has been much more of the “problem child.” Overall, prices rose 0.6% in September from the month before, bringing the annual rate of inflation to 3.7% from 3.4% in August, according to the latest Consumer Price Index report. And price increases are spreading to other goods and services.
From a bird’s-eye view, the economy looks mostly strong. Second-quarter gross domestic product came in at an annual rate of 2.2%, a much more robust pace than the government initially estimated. Much of that growth is connected to AI-related spending.
But two prized pieces of data are set to come out just one day after the Fed’s two-day meeting this week: the Personal Consumption Expenditures price index, the central bank’s preferred inflation gauge; and an initial read of third-quarter GDP.
The Federal Reserve is widely expected to keep interest rates steady on Wednesday, even as officials weigh another hike this year to tame rising inflation.
Central bankers have struggled to tame inflation for years. But gas and energy prices have been on an upward climb since the war in Iran began, and came in hotter than expected in September.
Still, the Fed’s moves may only do so much. Tweaking interest rates can’t bring down gas prices, for example. Rates are designed to slow or stimulate the economy broadly and without targeting individual industries.
At his 2:30 p.m. press conference, Fed Chairman Kevin Warsh is likely to face questions on the Fed’s next move. His answers may be brief: Warsh has come out strong against any “forward guidance,” which was used for years to tee up future decisions.
Warsh may also face questions as to whether the Fed held off on a hike because of political pressure just days before the midterm elections.
Fed leaders defend their independence. Meanwhile, President Donald Trump has repeatedly attacked the central bank for not lowering rates, and his approval rating has tanked over cost-of-living issues.
