OCTOBER 31, 2022 – DATA RELEASES KEEP THE FED ON TRACK FOR A RATE HIKE THIS WEEK
US wages rose in the third quarter by 5 percent, putting more pressure on the Fed to raise rates again this week. The increase is a slight cool down from the second quarter, but not enough to indicate a slowing labor market. Household spending also rose in September with the personal consumption expenditures index up 6.2 percent from a year ago.
The US economy grew by 2.6 percent in the third quarter after declining in the first half of 2022. The economic slowdown this year is a return to a normal rate of growth after the large 5.7 percent expansion last year. Consumer spending, the main driver of growth, is slowing as people begin to dip into savings to finance spending.
The data releases have the Fed on course to lift rates by 0.75 percent this week, and with a likely increase of 0.5 percent in December. The Fed’s primary goal is to reduce price pressures to stop inflation from becoming entrenched. The rate hike this week will be the sixth this year and will bring the Fed’s benchmark federal funds rate to 3.75 to 4 percent.