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    Russia’s Central Bank Raises Rates to 15 Percent to Curb Inflation

    The jump, from 13 percent, would bring a long period of “tight monetary conditions” in order to ease price pressures, the bank said. Russia’s Central Bank on Friday raised its key interest rate by two percentage points to 15 percent, a bigger increase than expected as the bank said it was trying to bring down stubbornly high inflation. The central bank, which said the annual inflation rate would range from 7 to 7.5 percent this year, predicted a long period of “tight monetary conditions” in order to bring the rate down close to its target of 4 percent.Driving the price pressures is “steadily rising domestic demand,” the bank said in its statement, spurred by the Kremlin’s decision to inject more money into the economy as it fights a war in Ukraine. The surge in spending “is increasingly exceeding the capabilities to expand the production of goods and the provision of services,” the bank said.At a news conference Friday, Elvira Nabiullina, the head of the Central Bank, said that increased government spending was one of the reasons for the interest rate increase. Russia’s defense budget has more than tripled since last year’s invasion of Ukraine, and it is scheduled to reach almost a third of the government’s spending next year.Russia was largely successful at weathering the immediate storm produced by sanctions aimed at punishing it for the invasion. The restrictions greatly curtailed its lucrative trade with Western countries and largely isolated it from the global financial system.But as Russia spends vast amounts on its war machine, its industrial production and labor markets are unable to keep up with the increased demand, translating into higher inflation and high levels of borrowing.GUM, a luxury shopping mall in Moscow, in August last year.Nanna Heitmann for The New York TimesYevgeny Nadorshin, the chief economist at the PF Capital consulting company in Moscow, said the central bank’s effort to slow the economy by raising interest rates could “suffocate the country’s growth.” “We are in the moment when growth is transforming into a recession,” Mr. Nadorshin said.He pointed to Russia’s mortgage and consumer borrowing markets, which have experienced rapid expansion. “People are still tense about the economy, but they feel that in the moment, things are much better than expected,” Mr. Nadorshin said in a phone interview. “People feel that this is a short period that they must take advantage of.”But Dmitri Polevoy, an economist in Moscow, said that despite high interest rates, he doesn’t see major risks with the Russian economy.“This story is exclusively about inflation,” Mr. Polevoy said in written comments to questions posed through a messaging service. “Under the current budgetary policy and with the same external conditions,” he said, “the risk of a recession is low.”After experiencing a nosedive following the invasion of Ukraine, the Russian economy has returned to growth. The International Monetary Fund recently estimated economic output would rise 2.2 percent this year, as oil exports have largely evaded Western sanctions and found new customers in India, China and other countries.The country has also been able to import Western goods from some former Soviet republics, as well as Turkey and Gulf States. Russian businesses, including banks, have adapted too, serving needs since the departure of many Western companies. More

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    Key Fed inflation gauge rose 0.3% as expected in September; spending tops estimate

    The core personal consumption expenditures price index, which the Federal Reserve uses as a key measure of inflation, increased 0.3% for the month, as expected.
    Personal spending kept up and then some, rising 0.7%, which was better than the 0.5% forecast.

    Inflation accelerated in September but consumer spending was even stronger than expected, according to a Commerce Department report Friday.
    The core personal consumption expenditures price index, which the Federal Reserve uses as a key measure of inflation, increased 0.3% for the month, in line with the Dow Jones estimate and above the 0.1% level for August.

    Even with the pickup in prices, personal spending kept up and then some, rising 0.7%, which was better than the 0.5% forecast. Personal income rose 0.3%, one-tenth of a percentage point below the estimate.
    Including volatile food and energy prices, the PCE index increased 0.4%. On a year-over-year basis, core PCE increased 3.7%, one-tenth lower than August, while headline PCE was up 3.4%, the same as the prior month.
    The Fed focuses more on core inflation on the belief that it provides a better snapshot of where prices are headed over the longer term. Core PCE peaked around 5.6% in early 2022 and has been on a mostly downward trek since then, though it is still well above the Fed’s 2% annual target. The Fed prefers PCE as its inflation measure as it takes into account changing consumer behavior such as substituting lower-priced goods as prices increase.
    Markets mostly shrugged off the report, with stock market futures pointing slightly higher and Treasury yields mixed across the curve.
    “Although consumer prices rose faster than expected from a month ago, core inflation continues to lose speed and this report will not likely change the Fed’s view that inflation will slow in the coming months as demand slows,” said Jeffrey Roach, chief economist at LPL Financial. “Eventually, spending will moderate after several months of consumers spending more than they earn.”
    This is the last inflation report the Fed will see before its two-day policy meeting next week. Traders are pricing in a near-100% chance that the central bank will announce no rate hike when the meeting concludes Wednesday, according to the CME Group. More

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    Inflation Held Steady in September, While Consumers Spent Robustly

    Overall inflation stayed at 3.4 percent in September, down from a peak of around 7 percent.Inflation remained cooler in September even as consumers continued to spend at a rapid clip, a sign that the economy is chugging along despite the Federal Reserve’s efforts to contain price increases by weighing on demand.Price increases climbed by 3.4 percent in the year through September, based on the Personal Consumption Expenditures index. That was in line with forecasts, and matched the increase in August.After stripping out volatile food and fuel to get a sense of the underlying trend in prices, a core price measure climbed by 3.7 percent, also in line with economist expectations and down slightly from a revised 3.8 percent a month earlier.Fed officials aim for 2 percent inflation based on the measure released Friday — so prices are still climbing much more quickly than normal. But at the same time, price increases have moderated notably compared to the summer of 2022, when the overall P.C.E. measure eclipsed 7 percent. And encouragingly, inflation has come down even as the economy has remained very strong.Friday’s report provided additional evidence of that resilience. Consumer spending continued to grow at a brisk pace last month, picking up by 0.7 percent from the previous month, and 0.4 percent after adjusting for inflation.The question confronting Fed officials now is whether inflation can slow the rest of the way at a time when consumption remains so strong. Businesses may find that they can charge more if shoppers remain willing to open their wallets.Inflation has slowed over the past year for a number of reasons. Supply chains became tangled during the pandemic, causing shortages that pushed up goods prices — but those have eased. Gas and food prices had shot up after Russia’s invasion of Ukraine, but have faded as drivers of inflation this year.Some of those changes have little to do with monetary policy. But in other sectors, the Fed’s higher interest rates could be helping. Pricier mortgages seem to have taken at least some steam out of the housing market, for instance. That could help by spilling over to keep a lid on rent increases, which are a big factor in key measures of inflation.But overall, the economy has been surprisingly resilient to higher borrowing costs. That is keeping the possibility of a further Federal Reserve rate move on the table, though investors still think one is unlikely.Policymakers have raised interest rates to 5.25 percent, up from near-zero as recently as March 2022. Many have suggested that interest rates are likely either at or near their peak. Officials are widely expected to leave interest rates unchanged at their two-day gathering next week, which wraps up on Nov. 1.But policymakers have been careful not to rule out the possibility of another rate increase, given the economy’s continued momentum.A report yesterday showed that the economy grew at a 4.9 percent annual rate in the third quarter, after adjusting for inflation. That was a rapid pace of expansion, and was even faster than what forecasters had expected.“We are attentive to recent data showing the resilience of economic growth and demand for labor,” Jerome H. Powell, the Fed chair, said in a recent speech, adding that continued surprises “could put further progress on inflation at risk and could warrant further tightening of monetary policy.”For now, officials are waiting to see if their substantial rate moves so far will feed through to cool the economy in coming months, especially because longer-term interest rates in markets have moved up notably in recent months. That is making it much more expensive to take out a mortgage or for companies to borrow to fund their operations, and could cool the economy if it lasts. More

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    Global bond rout looks ‘tremendously dangerous’ for stocks, hedge fund manager warns

    An intensifying bond rout is creating a “tremendously dangerous” outlook for global equities, according to Livermore Partners’ CIO.
    Higher-for-longer interest rates have caused bond yields to surge, hampering investor returns and piling pressure on the economy, David Neuhauser told CNBC.
    “I think that is going to cause a lot of pain moving forward in terms of the economy,” he said.

    An intensifying bond rout is piling pressure on the global economy and creating a “tremendously dangerous” outlook for equities, the chief investment officer of Livermore Partners hedge fund said Friday.
    A new era of higher interest rates has caused bond yields to surge, hampering returns for investors and flipping on its head the status quo of the past decade-and-a-half, David Neuhauser told CNBC. Bond yields move inversely to prices.

    Asked how worrying that landscape was for equities, he said: “I think it’s tremendously dangerous at this point.”
    “We’re in this world of risk where, for almost 15 years, you had a bond market that was in a bull market, and you had rates negative for several years,” Neuhauser told “Squawk Box Europe.”
    “That dynamic fed throughout the global economy, where housing prices were affordable, autos were affordable, and people were subjected to an environment and a lifestyle which had much lower interest rates.”

    That environment has shifted as central banks have pushed ahead with rate hikes to tackle higher inflation. That, in turn, has pushed bond yields higher and sapped money from government budgets by raising borrowing costs.
    In the U.S. Treasury market — a crucial component of the global financial system — bond yields have surged to highs not seen since the onset of the global financial crisis. In Germany, Europe’s largest economy, yields have hit their highest level since the 2011 euro zone debt crisis. And in Japan, where interest rates are still below 0%, yields have risen to 2013 highs.

    “I think that is going to cause a lot of pain moving forward in terms of the economy,” Neuhauser said.

    Bond bears ‘back from the dead’

    Those fiscal imbalances are giving “a lot of ammunition to the bond bears,” the hedge fund manager added, with interest rates likely to remain higher for longer.
    “What you’re seeing now with the bond market is, you know, bond vigilantes are back in vogue, back from the 80s, back from the dead, and I think they’re leading the market today,” Neuhauser said.
    Neuhauser’s statement echoes similar comments earlier this week from UBS Asset Management’s head of global sovereign and currency, Kevin Zhao, who said “the bond vigilante is coming back.”

    NEW YORK, NY – FEBRUARY 27: Traders work on the floor of the New York Stock Exchange on February 27, 2020 in New York City. With concerns growing about how the coronavirus might affect the economy, stocks fell for the fourth straight day. The Dow Jones Industrial Average lost almost 1200 points on Thursday. (Photo by Scott Heins/Getty Images)
    Scott Heins | Getty Images News | Getty Images

    Central banks have been keen to stress that interest rates are unlikely to start falling any time soon. The European Central Bank reiterated the point Thursday, holding rates steady at a record high of 4%, while the U.S. Federal Reserve is expected to hold at 5.25%-5.50% next week.
    Neuhauser said these higher rates will weigh heavily on consumers and corporates.
    “I think that’s going to cause a lot of pressure on the credit markets, it’s going to cause a lot of pressure on the consumer going forward,” he said.
    Corporates, too, are set to come under pressure from high debt and refinancing costs, Neuhauser said.
    “Ultimately that will lead to the downtrend of the economy and also it’s going to hurt the stock market and you’re starting to see that today,” he added. More

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    Ford’s U.A.W. Deal Will Raise Costs While Easing Labor Strife

    A tentative agreement gives union members at the carmaker their best terms in decades but could complicate Ford’s electric vehicle plans.When autoworkers went on strike in September, executives of the large U.S. automakers warned that union demands could significantly undermine their ability to compete in a fast-changing industry. The chief executive of Ford Motor said that the company might have to scrap its investment in electric vehicles.The future doesn’t look quite that bleak now that Ford and the United Automobile Workers union have reached a tentative agreement that is likely to serve as a template for deals the union eventually reaches with General Motors and Stellantis, the maker of Ram, Jeep and Chrysler.Ford’s costs will rise under the terms of the new contract, which includes a 25 percent raise over four and a half years, improved retirement benefits and other provisions. The extra expense will weigh on profit and could hamper Ford’s ability to invest in new technology, John Lawler, the company’s chief financial officer, said Thursday.But some analysts said the increases should be manageable. What will matter more for the company’s prospects, they said, is how innovative and efficient the company is in designing and producing cars and technology that can compete with offerings from Tesla, which dominates electric vehicles, the auto industry’s fastest growing segment.“They haven’t agreed to anything that will kill their competitiveness,” said Joshua Murray, an associate professor at Vanderbilt University who is an author of a book that examined how U.S. automakers lost ground to Japanese and European rivals. He said the deal could even help Ford, in part because the four-year contract ensures there would be no labor strife during an intense phase of the transition to electric vehicles.“They won’t be engaged in labor conflict while they’re dealing with” the technology shift, Mr. Murray said.Ford said on Thursday that it earned $1.2 billion from July through September on revenue of $44 billion; the company lost $827 million in the third quarter of 2022. But the division that makes electric vehicles lost $1.3 billion because of investments in new technology and increasing competition that has pushed down prices.The roughly 17,000 Ford workers who had been on strike, out of a total of 57,000 U.A.W. employees at the company, are expected to begin returning to factories soon. At U.A.W. Local 900 in Wayne, Mich., across the street from a Ford plant that was one of the first three factories to be struck by the U.A.W., workers were disposing of signs, firewood and bottled water that had been stockpiled for picket lines.“This is the best contract I have seen in my 30 years with Ford,” said Robert Carter, who works with engineers to lay out work stations on the assembly line.Cydni Elledge for The New York Times“This is the best contract I have seen in my 30 years with Ford,” said Robert Carter, 49, who works with engineers to lay out work stations on the assembly line. He said younger workers who had been earning well below the top wage of $32 an hour would see the biggest impact with the new contract; their pay would rise to more than $40 an hour over the next four and a half years.“For some people, their pay is going to almost double,” he said. “How can you say that’s not huge?”The reaction on Wall Street suggested that investors did not regard the agreement as a catastrophe. The carmaker’s shares fell 1.7 percent during regular trading on Thursday.But Ford stock slumped almost 5 percent in after-hours trading after the company said that, because of the cost of the strike, it could no longer stand by an earlier estimate that profit before interest expenses and taxes would be $11 billion to $12 billion in 2023. Mr. Lawler also said that strike would cost the company $1.3 billion this year.Analysts at Barclays estimated the annual cost of pay raises, improved retirement benefits and other measures in the new union contract to be $1 billion to $2 billion annually by the end of the four-year contract period, or equivalent to about 1 percent of sales.Mr. Lawler said on a conference call that the contract would raise the company’s labor costs by an average of $850 to $900 per vehicle. He said Ford would try to “identify efficiencies and improve productivity to help us deliver on our targets” in light of those higher labor costs.Some analysts were critical of the deal with the U.A.W., saying the cost to Ford could put it at a significant disadvantage, perhaps prompting the company to move more production to Mexico.“It adds a constraint in a very competitive market,” said Jonathan Smoke, chief economist at Cox Automotive. “It’s definitely a compromise that, I think, down the road will either limit Ford’s performance or force them to consider alternatives.”During the contentious negotiations, Ford complained that a big raise for workers would put it even further behind Tesla in the electric vehicle market. Sales of Ford’s two main battery-powered models, the F-150 Lightning truck and the Mustang Mach-E sport-utility vehicle, have been disappointing this year, and the company recently scaled back plans to increase production of the Lightning.“There is tremendous downward pressure on E.V. pricing,” Mr. Lawler said.But Tesla and other automakers like Toyota, Hyundai, Nissan and Honda, whose factories in the United States do not have unions, may now face pressure to raise wages, eroding any cost advantage they might have had.Crystal Nush and Daniel Morales work for Ford in Chicago. Of contract negotiators, Mr. Morales said he was “trying to understand what they agreed upon.”Jamie Kelter Davis for The New York TimesThe U.A.W. has declared its intention to try to organize those factories. The pay agreement with Ford, by far the biggest boost in compensation that the union has won in decades, is likely to serve as a powerful advertisement for collective bargaining.“Elon Musk better be looking at this,” said Madeline Janis, executive director of Jobs to Move America, an advocacy group that has close ties to organized labor. “Hyundai and Toyota better be looking at this. This is a new era where workers are standing up.”Tesla, the company Mr. Musk runs, and other carmakers that don’t have union workers in the United States, like BMW, Mercedes-Benz and Volkswagen, may decide to pre-emptively hand out raises to keep labor organizers at bay.“One strategy to deter union organizing is to raise wages,” said Rebecca Kolins Givan, an associate professor of labor studies and employment relations at Rutgers University.The decisive factor in the electric vehicle market will be the ability of Ford, G.M. and Stellantis to produce innovative products, Ms. Givan and others said. That is the responsibility of management, not assembly line workers.“It’s clear that these companies have work to do in the electric vehicle market,” Ms. Givan said. “There is nothing in this contract that creates any constraints.”In addition to the 25 percent pay increase, the contract gives Ford’s hourly workers cost-of-living wage adjustments, major gains on pensions and job security, and the right to strike over plant closings. The union had initially asked for a 40 percent wage increase.Ford has not yet set dates for restarting plants idled by the strike. The company previously said it could take up to four weeks to reach full production. Ford also needs some 600 suppliers to resume production and to deliver parts.“Bringing a plant back up is much more difficult than taking it down,” Bryce Currie, vice president of Americas manufacturing at Ford, said this month.Workers at the Wayne plant, which makes the Ranger pickup and the Bronco sport-utility vehicle, had not received return-to-work orders on Thursday, but they expected to be back on the assembly line next week.Walter Robinson has worked at the Wayne plant for 34 years. Three of his children work for Ford and will see big benefits from the new terms.Cydni Elledge for The New York TimesWalter Robinson, 57, has worked at the Wayne plant for 34 years and expects to retire by the end of the new contract. But he said three of his children work for Ford and would see a big benefit from the new terms.“My daughter has only been here two years, and it was going to take years for her to get the top wage,” he said. “This is going to help her immensely. This is going to make all of their lives better.” More

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    Tech stocks suffer two-day selloff as investors find ‘wrinkle or two’ in Alphabet, Meta earnings

    Alphabet and Meta both reported better-than-expected results, but investors found concerning stories in each.
    The Nasdaq has lost close to 3.5% over the past two days.
    At Meta, “management’s conservative tone tempered enthusiasm for a strong result and guide,” wrote analysts from Guggenheim, in a report late Wednesday.

    Sundar Pichai, CEO of Google
    Anindito Mukherjee | Bloomberg | Getty Images

    Alphabet’s earnings sailed past Wall Street estimates after the markets closed on Tuesday. Meta followed suit on Wednesday, solidly topping expectations.
    It didn’t matter.

    Following better-than-expected results on the top and bottom lines from two of the most valuable tech companies in the world, the Nasdaq responded by dropping roughly 3% over two days.
    With Amazon’s third-quarter report on deck after Thursday’s close and Apple set to announce next week, tech investors are showing less interest in what’s happened over the past three months and are more concerned about what may be coming as the year wraps up.
    In Alphabet’s earnings report, Wall Street fretted over the numbers out of the Google Cloud division, which is investing heavily to try and catch Amazon and Microsoft, particularly when it comes to managing hefty artificial intelligence workloads. The cloud group reported $8.41 billion in quarterly revenue, missing analysts’ estimates of $8.64 billion, according to LSEG, formerly known as Refinitiv.
    Ruth Porat, Alphabet’s finance chief, told analysts that the numbers reflect “the impact of customer optimization efforts,” a phrase that generally refers to clients reeling in their spending.
    The concern from Facebook parent Meta was sparked by comments that CFO Susan Li provided on the earnings call regarding the advertising market in the fourth quarter. Due to the escalating conflict in the Middle East and uncertainty about how it will affect ad spending, Meta provided a wider revenue guidance range than normal, Li said.

    “We have observed softer ads in the beginning of the fourth quarter, correlating with the start of the conflict, which is captured in our Q4 revenue outlook,” Li said on the call. “It’s hard for us to attribute demand softness directly to any specific geopolitical event.”
    Alphabet shares are down by about 12% over the past two days, while Meta has dropped roughly 7%. Amazon’s stock has dropped more than 6% over that stretch, heading into its report after the close.
    Up to this point, 2023 has been a bounce-back year for mega-cap tech after a brutal 2022. Meta is the second-best performing stock in the S&P 500, behind only AI chipmaker Nvidia, up roughly 140% for the year, compared to the Nasdaq’s 21% gain. Alphabet has jumped 39% and Amazon has gained 42%.
    All three internet companies instituted significant cost-cutting measures, starting late last year or early in 2023, slashing a record number of jobs and eliminating some experimental projects. Meta CEO Mark Zuckerberg said in February that this would be his company’s “year of efficiency,” and Alphabet CEO Sundar Pichai acknowledged in January that Google “hired for a different economic reality than the one we face today.”
    While investors cheered the newfound focus on expenses, concern is mounting alongside broader economic uncertainty and the challenges presented by high interest rates.
    The U.S. economy has been resilient so far. The Commerce Department said on Thursday that gross domestic product, rose at a seasonally adjusted 4.9% annualized pace in the quarter that ended September, up from an unrevised 2.1% pace in the second quarter.
    But with war still raging in Ukraine and President Joe Biden promising that the U.S. will support Israel in its battle against Hamas, the global economy is on a shaky foundation.
    In emphasizing the potential business impact of war in the Middle East on its business, Meta spelled out those concerns to shareholders.
    “Management’s conservative tone tempered enthusiasm for a strong result and guide,” wrote analysts from Guggenheim, in a report late Wednesday, though they still recommend buying the stock.
    Mark Avallone, president of Potomac Wealth Advisors, told CNBC’s “The Exchange” on Thursday that these latest earnings reports show the level of investor skittishness. Alphabet’s earnings were fine when looking at advertising and YouTube, its core businesses, he said, and the selloff tied to the cloud numbers indicates that “people are looking for problems where they may or may not exist.”
    “You’ve got earnings reports that really aren’t that bad,” Avallone said. “We’re finding a wrinkle or two in what we don’t like about them and then we’re trashing America’s best companies and there really seems to be a bit of an overreaction.”
    WATCH: There may be an overreaction to Amazon’s earnings if any doubt More

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    U.S. GDP grew at a 4.9% annual pace in the third quarter, better than expected

    Gross domestic product, a measure of all goods and services produced in the U.S., rose at a 4.9% annualized pace in the third quarter, ahead of the 4.7% estimate.
    The sharp increase came due to contributions from consumer spending, increased inventories, exports, residential investment and government spending.
    While the report could give the Fed some impetus to keep policy tight, traders were still pricing in no chance of an interest rate hike when the central bank meets next week.

    The U.S. economy grew even faster than expected in the third quarter, buoyed by a strong consumer in spite of higher interest rates, ongoing inflation pressures, and a variety of other domestic and global headwinds.
    Gross domestic product, a measure of all goods and services produced in the U.S., rose at a 4.9% annualized pace in the July-through-September period, up from an unrevised 2.1% pace in the second quarter, the Commerce Department reported Thursday.. Economists surveyed by Dow Jones had been looking for a 4.7% acceleration.

    The sharp increase came due to contributions from consumer spending, increased inventories, exports, residential investment and government spending.
    Consumer spending, as measured by personal consumption expenditures, increased 4% for the quarter after rising just 0.8% in Q2. Gross private domestic investment surged 8.4% and government spending and investment jumped 4.6%.
    Spending at the consumer level split fairly evenly between goods and services, with the two measures up 4.8% and 3.6%, respectively.
    The GDP increase marked the biggest gain since the fourth quarter of 2021.
    Markets reacted little to the news, with stock market futures negative heading into the open and Treasury yields mostly lower.

    While the report could give the Federal Reserve some impetus to keep policy tight, traders were still pricing in no chance of an interest rate hike when the central bank meets next week, according to CME Group data. Futures pricing pointed to just a 27% chance of an increase at the December meeting following the GDP release.
    “Investors should not be surprised that the consumer was spending in the final months of the summer,” said Jeffrey Roach, chief economist at LPL Financial. “The real question is if the trend can continue in the coming quarters, and we think not.”
    In other economic news Thursday, the Labor Department reported that jobless claims totaled 210,000 for the week ended Oct. 21, up 10,000 from the previous period and slightly ahead of the Dow Jones estimate for 207,000. Also, durable goods orders increased 4.7% in September, well ahead of the 0.1% gain in August and the 2% forecast, according to the Commerce Department.
    At a time when many economists had thought the U.S. would be in the midst of at least a shallow recession, growth has kept pace due to consumer spending that has exceeded all expectations. The consumer was responsible for about 68% of GDP in Q3.
    Even with Covid-era government transfer payments running out, spending has been strong as households draw down savings and ramp up credit card balances.
    The gains also come despite the Federal Reserve not only raising rates at the fastest clip since the early 1980s but also vowing to keep rates high until inflation comes back to acceptable levels. Price increases have been running well ahead of the central bank’s 2% annual target, though the rate of inflation at least has ebbed in recent months.
    The chain-weighted price index, which takes into accounts changes in consumer shopping patterns to gauge inflation, rose 3.5% for the quarter, up from 1.7% in Q2 and higher than the Dow Jones estimate for 2.5%.
    Along with rates and inflation, consumers have been dealing with a variety of other issues.
    The resumption of student loan payments is expected to take a bite out of household budgets, while elevated gas prices and a wobbly stock market are hitting confidence levels. Geopolitical tensions also pose potential headaches, with fighting between Israel and Hamas and the war in Ukraine posing substantial uncertainties about the future.
    While the U.S. has proven resilient to the various challenges, most economists expect growth to slow considerably in the coming months. However, they generally think the U.S. can skirt a recession absent any other unforeseen shocks.
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    European Central Bank holds interest rates steady after 10 consecutive hikes

    The European Central Bank’s key interest rate will remain at 4% as it opted to pause in October after 10 consecutive hikes.
    The ECB repeated its message that rates at current levels would help bring inflation to target if “maintained for a sufficiently long duration.”
    The Bank of England, Swiss National Bank and U.S. Federal Reserve all held rates steady in September.

    The European Central Bank headquarters.
    Daniel Roland | Afp | Getty Images

    The European Central Bank ended its run of interest rate hikes on Thursday, despite new upside risks to inflation from oil markets amid the Israel-Hamas war.
    The key rate is set to remain at a record high of 4%, where it was brought through 10 consecutive hikes that began in July 2022 and brought rates back into positive territory for the first time since 2011.

    The Governing Council said recent information confirmed its medium-term outlook for inflation to reach 2.1%.
    “Inflation is still expected to stay too high for too long, and domestic price pressures remain strong. At the same time, inflation dropped markedly in September, including due to strong base effects, and most measures of underlying inflation have continued to ease,” it said in a statement.
    Markets had priced in a more than 98% chance of a hold, after the ECB gave a strong indication at its previous meeting that rates had peaked.
    The euro was 0.15% lower against the British pound at 1:40 p.m. London time, declining slightly after the announcement. The European currency was 0.2% down against the U.S. dollar.
    The move in September was described as a dovish rise, as the ECB said rates had reached levels that would substantially contribute to the fight against inflation, if “maintained for a sufficiently long duration.”

    It repeated this message on Thursday, and said its decision making remains data-dependent.
    The ECB’s decision is in line with major central banks around the world, which are widely considered to have already reached or to be on the brink of peak interest rates. The Bank of England, Swiss National Bank and U.S. Federal Reserve all opted to hold in September.

    Higher for longer

    ECB officials have in interviews stressed a ‘higher for longer’ message on rates, while insisting that an inflationary shock could spur them to hike again, as they seek to dampen market expectations of rate cuts starting in the middle of next year.
    The central bank needs monetary policy to remain sufficiently tight to meet its current inflation forecasts of 5.6% this year, 3.2% next year and 2.1% in the “medium term.”
    However, the ECB must also reckon with persistently weak business activity and tepid euro zone growth forecasts of 0.7% in 2023 and 1% in 2024, as former EU powerhouse Germany stagnates.
    The bank is also assessing volatility in the bond market, where yields have risen sharply, reflecting a global sell-off.
    Marcus Brookes, chief investment officer at Quilter Investors, said risks to inflation remained in wage growth and in energy prices going up as a result of uncertainty in the Middle East.
    “Going forward, like other central banks, it will say the market needs to expect higher interest rates for longer, with the door being left open should we see inflation spike again,” Brookes said in an emailed note.
    “However, given the stagnating economy and the fact other central banks have moved into a holding pattern, something very unexpected would need to happen for rates to be raised again. The pressure will quickly shift to cutting rates given the lack of economic growth.” More