Federal Reserve Rate Decision Today; Economy Is Up but Consumers Feel Down

Federal Reserve Rate Decision Today; Economy Is Up but Consumers Feel Down By James Christie

Good day. The Federal Reserve today is likely to leave its benchmark interest rate unchanged at a 22-year high while keeping open the possibility of another rate hike in the future to fight inflation. Meanwhile, the economy has picked up steam even as consumer confidence readings are depressed. Lingering inflation can't explain all of the unhappiness: Referred pain from the wider world could be at play, writes Greg Ip.

Now on to today's news and analysis.

Top News Fed Officials Debate Whether They Have Raised Rates Enough

Fed officials, who are expected to hold rates steady when their two-day policy meeting concludes Wednesday, could raise rates again in December or next year if the economy doesn't cool and inflation picks up again after slowing since June. They also will likely consider whether the recent swift run-up in Treasury yields could effectively substitute for another rate increase.

The Economy Is Great. Why Are Americans in Such a Rotten Mood?

A lot of pessimism about the economy could be "referred pain," Greg Ip writes in his Capital Account column . Just as part of your body can hurt because of injury to another, pessimism about the economy may reflect dissatisfaction with the country as a whole. Lately, there has been a lot to be dissatisfied about: intensifying political and cultural conflict and intolerance, the pandemic, the border, mass shootings, crime, war in Ukraine and now the war in the Middle East.

U.S. Economy UAW Deal Shows Unions Are Winning. How Long Will It Last?

The United Auto Workers' tentative deals with Detroit automakers mark the latest union victory in a year of multiplying strikes and sizable gains in a robust labor market. The agreements could embolden other unions to take aggressive approaches to contract negotiations and fuel more strikes in coming months-as long as the economy stays strong.

Stellantis Says It Lost $3 Billion of Revenue Due to UAW Strike The Hidden Cost of the Hollywood Strikes

A Hollywood production freeze caused by months of writer and actor strikes has pinched Los Angeles-area household incomes, pushed small businesses to the brink and put families behind on bills.

U.S. Home Prices Rose to Record in August

The S&P CoreLogic Case-Shiller National Home Price Index, rose 2.6% from a year earlier in August, compared with a 1.0% annual increase the prior month. The August level was the highest since the index began in 1987.

Key Developments Around the World The U.S. and European Economies Are Diverging

The gap between the U.S. and European economies is widening, with growth and inflation on different trajectories as the fallout from the war in Ukraine weighs on Europe's prospects.

China's Property Developers Cut Prices, and Homeowners Resist

After being stuck in a housing downturn for two years, cities across China are giving real-estate developers the go-ahead to cut prices on new homes to revive sales. They are quickly running into resistance from homeowners who don't want to see the values of their properties go down.

Financial Regulation Roundup Sam Bankman-Fried's Lawyers Seek to Regain Ground in FTX Trial

Sam Bankman-Fried's lawyers rested their case after seeking to rehabilitate the FTX founder's credibility from the prosecutors' two-day grilling. Bankman-Fried, dressed in a gray suit, floundered through the end of Assistant U.S. Attorney Danielle Sassoon's cross-examination.

Jury Finds Realtors Conspired to Keep Commissions High

A federal jury found the National Association of Realtors and large residential brokerages liable for about $1.8 billion in damages after determining they conspired to keep commissions for home sales artificially high.

Parents Left Out of Biden's New Student Loan Plan

Parent Plus loans, which account for more than $111 billion in outstanding student debt, aren't eligible for lower monthly payments and shorter paths to forgiveness offered under the Saving on a Valuable Education program.

Texting: Wall Street's Latest Dilemma

Wall Street firms are facing a problem that is growing more difficult by the day: how to capture staff communications as required by regulators while the ways their employees talk to each other keep changing.

Firms Push Back on Proposed Expansion of Disclosure on Expenses

Executives at large public companies are concerned about the Financial Accounting Standards Board's plan requiring them to further break down labor and other operating expenses that appear on their income statements, with some saying it would impose significant costs and not aid their investors.

Forward Guidance Wednesday (all times ET)

8:15 a.m.: ADP National Employment Report for October

10 a.m.: ISM Report on Business Manufacturing PMI for October; U.S. Job Openings and Labor Turnover Survey (JOLTs) for September

2 p.m.: Federal Reserve interest rate decision

2:30 p.m.: Fed's Powell post-FOMC meeting press conference

Thursday

5 a.m.: Eurozone Manufacturing PMI for October

8 a.m.: Bank of England interest rate decision

8:30 a.m.: U.S. productivity and costs, preliminary for third quarter

8:30 a.m.: U.S. weekly jobless claims

Research Canada GDP Data Points to Recession in 2024

Canada's gross domestic product data for August, and the early projection for September, indicates the lagged impacts of higher interest rates "are likely to materially depress economic activity moving forward," according to economists at Desjardins Securities. Canada's GDP was unchanged in August, relative to the market consensus for a 0.1% gain. Statistics Canada expects a flat GDP reading for September, meaning third-quarter output is on track to be well below the Bank of Canada's projection for 0.8% annualized growth in the three-month period. "We expect the economy to more clearly enter a recession in 2024," Desjardins says. On Monday, Bank of Canada Governor Tiff Macklem told lawmakers higher rates are working to crimp consumption, adding weaker output in the coming quarters would help put downward pressure on inflation.

-Paul Vieira

Commentary Yield Curve Control Joins the Living Dead

Japan's Halloween monetary policy tweak didn't go as far as some yen bulls had hoped, but a stronger yen could still spook global markets -especially if rising U.S. rates keep forcing the Bank of Japan's hand, Jacky Wong writes.

Basis Points A private gauge of China's factory activity fell into contraction in October, suggesting continued economic headwinds despite Beijing's recent efforts to shore up growth. U.S. consumer confidence fell in October for the third month in a row, as the private research group The Conference Board said its consumer-confidence index declined from 104.3 in September to 102.6. Economists had expected the index to fall to 100.00, according to a Wall Street Journal poll. (Dow Jones Newswires) Business activity in the Chicago area contracted more than expected in October, weakening slightly more than September, with the Chicago Business Barometer falling from 44.1 to 44.0, data from MNI Indicators showed Tuesday. Economists polled by The Wall Street Journal expected the index to rise to 45.3. (DJN) Canada's economy remained stalled in the latest quarter and might have dipped into a technical recession. Gross domestic product was effectively flat for a second straight month in August, and an early estimate points to the economy remaining stalled at the industry level in September, indicating the economy flatlined for the third quarter and might have contracted roughly 0.1% on an annual basis. (DJN) Mexico's economic activity picked up pace in the third quarter, expanding for an eighth consecutive period with consumers continuing to spend and industrial production boosted by gains in construction. Gross domestic product grew 0.9% from the second quarter in seasonally adjusted terms, the National Statistics Institute said, the fastest quarterly growth since the third quarter of 2022. (DJN) Feedback Loop

This newsletter was compiled by James Christie in San Francisco and Michael Maloney in New York.

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11-01-23 0716ET