Wednesday's FOMC rate decision was the headline economic news this week. As widely expected, the Committee raised the target range for the fed funds rate by 75 bps for the third consecutive time. Updated forecasts were released as well, with inflation expected to remain well above the Fed's 2% target for longer than previously published in June. As such, the median projection for the year-end fed funds rate rose a full percentage point (pp) for 2022 and increased 0.8pp for 2023. Real GDP growth projections were also slashed for this year and next, while unemployment is expected to be higher. On balance, the meeting underpinned the FOMC's firm commitment to do whatever it takes to bring inflation back down to earth. See Interest Rate Watch for more detail.
The rapid rise in the fed funds rate (the upper bound sits at 3.25%) has put pressure on interest-rate sensitive sectors. Housing, in particular, has faltered as mortgage rates have climbed. The NAHB/Wells Fargo Housing Market Index (HMI), a measurement of home builder sentiment, slid three points to 46 in September—the ninth straight monthly decline. Notably, an HMI reading below 50 indicates that more builders report conditions as "poor" than those who see conditions as "good."
The skid in builder sentiment mirrors the trend decline in home construction. Total housing starts surprised to the upside in August, increasing 12.2% over the month. Single-family starts rose 3.4% and multifamily starts increased 28%. Improving supply chain conditions likely increased building material availability during the month, allowing builders to move forward with projects already in the pipeline. Meanwhile, building permits, a forward-looking indicator that leads housing starts by a couple of months, plummeted 10% in August. The drop in permits reflects the ongoing trend of builders tapping the brakes on construction in response to weaker demand and rising financing costs.
June 2020 Economy At A Glance
Wells Fargo Economics & Financial Report / Jun 18, 2020
The Fed expects to hold interest rates near zero through the end of this year, perhaps well into next year, and maybe even into ’22.
This Week's State Of The Economy - What Is Ahead? - 02 December 2022
Wells Fargo Economics & Financial Report / Dec 08, 2022
Total payrolls rose by 263K in November, with the unemployment rate holding steady at 3.7% and average hourly earning rising by 0.6%.
This Week's State Of The Economy - What Is Ahead? - 12 August 2020
Wells Fargo Economics & Financial Report / Aug 15, 2020
The consumer has been a bright spot in the recovery so far, but with jobless benefits in flux and no clear path for the long-awaited stimulus bill, the support here could fade.
This Week's State Of The Economy - What Is Ahead? - 10 September 2020
Wells Fargo Economics & Financial Report / Sep 12, 2020
Although the recovery from the COVID recession is still far from over, the U.S. economy is bouncing back faster than many expected.
This Week's State Of The Economy - What Is Ahead? - 09 June 2023
Wells Fargo Economics & Financial Report / Jun 14, 2023
An unexpected spike in jobless claims is a sign that cracks are forming in the labor market. Higher mortgage rates look to be hindering a housing market rebound.
This Week's State Of The Economy - What Is Ahead? - 04 November 2022
Wells Fargo Economics & Financial Report / Nov 07, 2022
Employers continued to add jobs at a steady clip in October, demonstrating the labor market remains tight and the FOMC will continue to tighten policy.
This Week's State Of The Economy - What Is Ahead? - 11 December 2020
Wells Fargo Economics & Financial Report / Dec 14, 2020
Emergency authorization of the Pfizer-BioNTech COVID vaccine appears imminent, but the virus is running rampant across the United States today, pointing to a grim winter.
This Week's State Of The Economy - What Is Ahead? - 23 September 2020
Wells Fargo Economics & Financial Report / Sep 22, 2020
European activity is surging. Germany and Italy are leading the way, but France is close behind despite an ongoing rise in cases. The Google data are a bit outdated, but are hard to reconcile with today’s weak Eurozone services PMI figures.
November 2020 Economy At A Glance
Wells Fargo Economics & Financial Report / Nov 12, 2020
U.S. gross domestic product (GDP) grew 7.4 percent, or $1.3 trillion in Q3, adjusted for inflation.
This Week's State Of The Economy - What Is Ahead? - 25 October 2019
Wells Fargo Economics & Financial Report / Oct 26, 2019
Sales of existing homes fell 2.2% to a 5.38 million-unit pace in September, but sales and prices were still up enough in the quarter that they will add solidly to Q3 GDP growth.
