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    Fed Holds Interest Rates Steady and Pledges to Proceed Carefully

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    The Federal Reserve left interest rates at 5.25 to 5.5 percent, but its chair, Jerome Powell, said policymakers could still raise rates again.The Federal Reserve left interest rates unchanged on Wednesday while keeping alive the possibility of a future increase, striking a cautious stance as rapid inflation retreats but is not yet vanquished.Rates have been on hold in a range of 5.25 to 5.5 percent since July, up from near-zero as recently as March 2022. Policymakers think that borrowing costs are high enough to achieve their goal of curbing economic growth if they are kept at this level over time.By cooling demand, the Fed is hoping to prod companies to raise prices less quickly. While the economy has held up so far — growth was unusually strong over the summer — inflation has come down since 2022. Overall price increases decelerated to 3.4 percent as of September, from more than 7 percent at their peak.Fed policymakers are now trying to wrestle inflation the rest of the way back to 2 percent. The combination of economic resilience and moderating inflation has given officials hope that they might be able to slow growth gradually and relatively painlessly in a rare “soft landing.” At the same time, the economy’s surprising endurance is forcing the Fed to question whether it has done enough to tamp down demand and price increases.The major question facing Fed officials is whether they will need to make one final rate increase in the coming months, a possibility they left open on Wednesday.“The full effects of our tightening have yet to be felt,” Jerome H. Powell, the Fed chair, said at a news conference after the decision. “Given how far we have come, along with the uncertainties and risks we face, the committee is proceeding carefully.”Jerome H. Powell, the Fed chair, said Wednesday that policymakers had not determined whether further interest rate increases would be needed to get inflation down to 2 percent.Haiyun Jiang for The New York TimesMr. Powell said officials would base decisions about the possibility and extent of additional policy firming — and how long rates will need to stay high — on economic data and how various risks to the outlook shaped up.Stock prices in the S&P 500 index rose as Mr. Powell spoke, and odds of further rate increases declined, suggesting that investors took his comments as a sign that interest rates were probably at their peak. But Diane Swonk, chief economist at KPMG, said she thought markets were getting ahead of themselves.“They are not declaring victory,” she said, explaining that while she did not expect the Fed to move rates in December, an early-2024 move seemed possible. “They are hesitant to say, ‘We’re done.’”Other analysts suggested that by not pushing back on the market’s expectation that the Fed was done raising interest rates, Mr. Powell was essentially endorsing that view, barring an unexpected surprise.At the Fed’s previous meeting, in September, policymakers had forecast that one more quarter-point increase in rates would probably be appropriate before the end of 2023. But officials did not release updated economic projections on Wednesday — they are scheduled to do so after the Fed’s Dec. 12-13 meeting — and conditions have changed since their last assessment.That is because longer-term interest rates in markets have jumped higher. While the Fed sets short-term borrowing costs, longer-term rates adjust at more of a delay and for a variety of reasons.The recent rise has made everything from mortgages to business loans more expensive, which might help cool the economy. The change may make it less necessary for Fed officials to raise rates further.“Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation,” the Fed said in its statement Wednesday, newly pointing to financial conditions as a restraint on growth.“It’s their way of saying that higher interest rates matter,” Gennadiy Goldberg, a rates strategist at TD Securities, said of the line. “Interest rates are doing some of the Fed’s work for them.”Mr. Powell made it clear that the Fed was closely watching higher market interest rates — particularly to see whether the jump was sustained, and to what extent it squeezed consumers and businesses.But Mr. Powell said the Fed’s staff economists were not predicting an imminent recession, which suggests that they do not see the higher borrowing costs hurting the economy too severely.And he said policymakers were still focused on whether interest rates were high enough to ensure that inflation would cool fully, given recent evidence of continued economic strength.“We are not confident yet that we have achieved such a stance,” Mr. Powell said.While the Fed’s moves have held back some parts of the economy, including sales of existing homes, the labor market continues to chug along. Hiring is still quicker than before the pandemic. Wage gains have cooled, but are also faster than pre-2020.As Americans win jobs and raises, they have continued to open their wallets. Spending climbed faster than economists expected in September, and growth overall has been much faster than what most forecasters would have expected a year and half into the Fed’s campaign to cool it.That strength could become a problem for central bankers, should it persist. If consumers remain ravenous for goods and services, companies may continue raising prices, making it more difficult to eliminate what is left of rapid inflation.At the same time, Fed officials do not want to brake too hard, which could unnecessarily cause a recession. Policy changes often act with a lag, and it can take months for the cumulative effects of interest rate increases to fully bite.“Everyone has been very gratified to see that we’ve been able to achieve pretty significant progress on inflation without seeing the kind of increase in unemployment that is very typical” with interest rate increases, Mr. Powell said. “The same is true of growth.”But he also made it clear that the Fed still thought a slowdown in the job market and overall growth were likely to prove necessary. Healing supply chains and a fresh supply of workers have helped to bring the economy into balance so far, but those forces may not be enough to bring inflation fully back to normal, he said.“What we do with demand is still going to be important,” he said, later adding that “slowing down is giving us, I think, a better sense of how much more we need to do, if we need to do more.” More

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    JOLTS Report Shows U.S. Job Openings Steady in September

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    The NewsJob openings changed little in September, the Labor Department announced on Wednesday.There were 9.6 million job openings in September, slightly up from August’s revised total of 9.5 million, according to seasonally adjusted figures from the Job Openings and Labor Turnover Survey. The figure was greater than economists’ expectations of 9.3 million openings. The rate of workers quitting their jobs was flat, at 2.3 percent, for the third straight month.The Federal Reserve closely monitors job openings to understand whether the economy is running too hot.Jim Wilson/The New York TimesWhy It Matters: The Fed looks for signs of a soft landing.The Federal Reserve closely monitors job openings to understand whether the economy is running too hot. Since March 2022, the Fed has tried to fight inflation by raising interest rates to their highest level since 2001.The Fed has remained committed to hitting an annual inflation target of 2 percent without causing a significant spike in unemployment — a combined outcome known as a “soft landing.”Fed officials are expected to maintain a target range of 5.25 to 5.5 percent for interest rates when they meet on Wednesday. The overall trend of slowing job openings is a sign that rate increases have cooled the economy, according to experts.“All of this means the Fed probably doesn’t feel the need to raise rates further, but they’re not going to ease anytime soon,” said Sonu Varghese, global macro strategist at Carson Group, said of the report on job openings.Job openings, which reached a record of more than 12 million in March 2022, have trended down, as has the job-quitting rate, while separations have been flat. As openings rose slightly in September, the number of openings per unemployed worker was flat, at 1.5, the same as August.Less churn in the labor market indicates that rate increases are having an effect, said Julia Pollak, the chief economist at the job search website ZipRecruiter. ZipRecruiter’s latest survey of new employees found that the share of hires who received a pay increase, got a signing bonus or were recruited to their new jobs each fell.Background: ‘More wood to chop’ for the Fed.Job openings remain much higher than they were before the pandemic, and the number of unemployed workers per job opening is much lower. Both are signs of a tight labor market.Inflation also remains above the Fed’s 2 percent target. The Fed’s preferred inflation measure has fallen nearly four percentage points since the summer of 2022, to 3.4 percent.“The Fed’s primary focus remains inflation,” said Sarah House, a senior economist at Wells Fargo. “They’re reading the economy through the lens of ‘What does this mean for the path of inflation ahead?’”According to Stephen Juneau, an economist at Bank of America, the Fed still has “more wood to chop.” His team expects that the Fed will raise rates one more time, in December, to reach a soft landing.Economic growth in the third quarter accelerated, and another measure of wage growth grew faster than expected over the summer. The yield on the 10-year U.S. Treasury bond, a key measure of long-term borrowing costs that undergirds nearly everything in the economy, has reached its highest level since 2007 as the outlook for growth has improved.What’s next: The October jobs report on Friday.The report on Wednesday morning kicked off an important few days in economic news. After Fed officials meet to decide whether to raise rates, October’s jobs report will be released on Friday by the Labor Department.The data is expected to show that hiring slowed, with the addition of 180,000 jobs, according to Bloomberg’s survey of economists, down from September’s 336,000. The unemployment rate is expected to tick up to 3.9 percent, after holding steady at 3.8 percent in September. More

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    A Key Measure of Wages Grew at a Moderate Pace This Summer

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    The Employment Cost Index, which Federal Reserve officials watch closely as a gauge of pay trends, has come down since last year.A measure of pay and benefits that officials at the Federal Reserve have been watching closely as they try to gauge the heat of the labor market grew at a moderate pace over the summer.The Employment Cost Index, a quarterly measure from the Labor Department that tracks changes in wages and benefits, climbed 1.1 percent in the third quarter of 2023 versus the prior three months. That was slightly faster than the 1 percent that economists expected and up from the previous 1 percent reading.That pace of growth does mark a deceleration from a series of rapid quarterly gains in 2022. And on an annual basis, wage gains continue to slow: The employment cost measure rose by 4.3 percent on a yearly basis, down from the 4.5 percent reading in the previous report.Still, the index averaged 2.2 percent yearly gains in the decade leading up to the pandemic, underscoring that today’s pace remains unusually quick. And it is notable that wage gains continue to come in strong at a time when economists had expected them to be returning to a more normal pace. The trend could present a challenge for officials at the Federal Reserve.Rapid wage gains are good news for households, but they can spell trouble for Fed policymakers. Central bankers often worry that it will be hard to fully snuff out inflation if pay gains are climbing quickly. Companies that are paying workers higher wages are likely to try to charge more to cover their costs.Fed officials are meeting this week to discuss what to do next with interest rates, and are widely expected to hold borrowing costs steady at the conclusion of their two-day meeting on Wednesday. Economists did not expect that to change in the wake of Tuesday’s wage data.“It’s more about waiting for the labor market to continue to normalize,” said Oscar Muñoz, chief U.S. macro strategist at TD Securities. “It is taking longer, but I think that the Fed can be patient.”Fed officials have already raised interest rates to a range of 5.25 to 5.5 percent, up from near-zero in March 2022, in their bid to slow inflation.Those higher rates make it more expensive to borrow money to buy a house, purchase a car or expand a business. As companies hire less voraciously and demand wanes, wage growth should slow and companies should find it more difficult to raise prices without losing customers. That chain reaction is expected to put a lid on inflation.But the labor market’s cool-down has been an unexpectedly bumpy one. Job gains have slowed somewhat, but they remain much faster than many economists had expected after so much Fed action.That has left Fed officials closely watching wages.If pay growth continues to calm even as companies hire at a solid clip, it would suggest that the continued job gains are being driven by an improving supply of applicants — and that the labor market is still slowly coming back into balance.The logic is simple: If the job market were running hot, companies would be paying more and more as they tried to poach needed employees from one another. That would keep pay gains climbing swiftly. If it is cooling toward a more normal level of tightness, economists would expect wage gains to pull back.So far, policymakers have been interpreting labor market data to mean that balance is in fact returning. That’s partly because another closely watched measure of wage growth, the average hourly earnings index, has been showing steady moderation.That gauge is useful because it comes out every month, but it is also susceptible to data quirks. It tends to move around as the composition of the work force shifts. If a lot of low-wage workers gain jobs, for instance, the hourly earnings measure can drift lower.Given that, Fed officials closely monitor the Employment Cost Index, which avoids some of the data pitfalls that afflict other wage measures.“Wage growth is slowing down, but not as much as other data sources have suggested,” Cory Stahle, economist at Indeed Hiring Lab, wrote in an analysis after the report. He added that “pay growth will likely keep slowing going forward, but the labor market continues to display notable resilience.” More

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    What to Watch for as the Federal Reserve Meets This Week

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    Central bankers are expected to leave interest rates steady at a 22-year high of 5.25 to 5.5 percent. Investors are looking for hints at what’s next.Federal Reserve officials are widely expected to leave interest rates steady at the conclusion of their two-day meeting on Wednesday. But investors and economists will watch for any hint about whether rates are likely to stay that way — or whether central bankers still think they might need to increase them again in the coming months.Officials will release a statement announcing their policy decision at 2 p.m., followed by a news conference with Jerome H. Powell, the Fed chair, at 2:30 p.m. Both will offer policymakers a chance to signal what they think might come next for interest rates and the economy.Central bankers have already raised interest rates to a range of 5.25 to 5.5 percent in a push to tame inflation. That rate setting is up from near-zero as recently as early 2022, and is the highest level in 22 years.Higher borrowing costs are meant to make it more expensive to buy a home, purchase a car or expand a business using a loan. By tapping the brakes on demand and hiring, that slows the broader economy, which can help to put a lid on price increases.Fed officials have widely signaled that they are close to the point where they no longer need to raise interest rates — simply leaving them around this level will cool the economy and help drive inflation back down to their 2 percent goal over time. The question now is twofold: Will policymakers feel it necessary to make one more quarter-point interest-rate move later this year or early next? And once they decide that rates are high enough, how long will they leave them elevated?Here’s what to watch for on Wednesday.Jerome Powell, the Federal Reserve chair, said in that “at the margin” the recent tightening in financial conditions could reduce the need for further tightening, “though that remains to be seen.”Michelle V. Agins/The New York TimesThe Fed’s language will be in focus.Central bankers will first release their standard monetary policy statement, and markets will carefully watch to see if officials make any changes that suggest they are done raising interest rates.Last time, officials said that “in determining the extent of additional policy firming that may be appropriate,” they would contemplate incoming economic data. If they softened that language to make further policy moves sound less likely, it would be notable.But investors may not find much else to parse in this release. Fed officials will not release fresh quarterly economic projections again until December. Given that, traders will have to watch Mr. Powell’s news conference for more details about what comes next.Recent market moves could be critical.As of the Fed’s latest economic forecasts in September, officials still thought that one more rate increase in 2023 might be appropriate.But something critical has changed in the intervening weeks.Long-term interest rates have climbed notably in markets since the Fed gathered on Sept. 19-20. While central bankers directly set short-term interest rates, longer-term borrowing costs often adjust only at a delay — and the recent jump is making everything from mortgages to business loans much more expensive.That could help slow the economy, doing some of the Fed’s work for it. And some economists think in light of that, central bankers will no longer see a need for another rate increase.Mr. Powell, during a question-and-answer session on Oct. 19, said that “at the margin” the recent tightening in financial conditions could reduce the need for further tightening, “though that remains to be seen.”“I took it to mean that perhaps there isn’t as much urgency to raise interest rates further,” said Blerina Uruci, chief U.S. economist at T. Rowe Price. She said that she didn’t expect officials to rule out another move, but “they need to manage a broad range of risks right now.”If consumer spending remains so strong that companies feel they can raise prices without scaring away customers, it could make it tough to fully wrestle inflation back down to 2 percent.Amir Hamja/The New York TimesStrong consumer spending may keep officials alert.While the Fed is dealing with the possibility that higher market-based interest rates will weigh on the economy, they are also confronting another potential challenge: Economic data have remained surprisingly strong in recent months.On one level, this is good news. Consumers are shopping and companies are hiring at a rapid clip in spite of higher interest rates, and that resilience has come at a time when inflation has moderated substantially. The Fed’s favorite inflation gauge has slowed to 3.4 percent, down from 7.1 percent at its peak in summer 2022.But if consumer spending remains so strong that companies feel they can raise prices without scaring away customers, that could make it tough to fully wrestle inflation back down to 2 percent.That’s why policymakers at the Fed are watching the continued strength closely — and trying to decide whether it suggests that further interest rate increases are needed.Timing is a big question.Officials may decide that they simply need more time to watch economic trends play out.Holding off on further rate moves in November — and possibly beyond — could give officials a chance to see if growth and consumer spending slow in the way companies have been warning they could.Plus, keeping rates on pause will give officials more time to see how looming geopolitical risks shape up. The war between Israel and Hamas could affect the economy in hard-to-predict ways. If it escalates into a regional war, it could shake consumer confidence. But a wider conflict could also cause oil prices to pop, pushing up inflation.At the same time, officials won’t want to fully rule out a future move at a time when market rates could fall, risks could fade and growth could remain quick.“Maintaining optionality makes a lot of sense in the current context,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.Wall Street is divided over what will come next. Investors see about a one-in-four chance of a rate move at the Fed’s final 2023 meeting, which takes place on Dec. 13. They see a slightly higher — but far from guaranteed — chance of a move in early 2024.“Nobody is feeling a high degree of confidence about the economic outlook right now,” Ms. Uruci said. More

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    Halloween Shoppers Not Spooked as Economic Slowdown Remains Elusive

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    Economists spent much of 2023 warning that a recession could be imminent as the Federal Reserve raised interest rates to the highest level in more than two decades. But for companies like Soergel Orchards in western Pennsylvania, a slowdown is nowhere in sight.“People are buying the decorative things,” said Amy Soergel, manager at the company who explained that gourds and cornstalks were in high demand and that customers were coming out to select pumpkins and apples. “People love to pick — people will pick anything.”Sales are up even though a string of rainy weekends have held back attendance at the farm’s annual fall festival. Demand at the hard cider shop has been solid. And the owners are bracing for a strong season in their store selling Christmas decorations.Soergel’s bustling business is a microcosm of a trend playing out nationwide. Consumer demand has unexpectedly boomed in 2023, defying widespread expectations for a slowdown and helping to fuel strong overall growth. The economy expanded at an eye-popping 4.9 percent annual rate in the third quarter, far faster than the roughly 2 percent pace officials at the Fed think of as its standard growth pace.That is great news for American companies. But it is a also a source of confusion. Why is the economy still growing so quickly more than a year and a half into the Fed’s campaign to slow it down, and how long will the upswing last?Fed officials have lifted interest rates above 5.25 percent, making it more expensive to take out a mortgage, borrow to expand a business or carry a credit card balance. Those moves were meant to trickle out through markets to cool the real economy. Some parts of the economy have felt the squeeze — existing home sales have slowed, for instance. Yet employers continue to hire and families keep spending.Customers were coming to Soergel Orchards to select pumpkins and apples.Ross Mantle for The New York Times“People love to pick — people will pick anything,” a manager said.Ross Mantle for The New York TimesCornstalks and gourds are in high demand at Soergel’s.Ross Mantle for The New York TimesIt is difficult to predict what comes next as the all-important holiday shopping season approaches. A solid job market and cooling inflation could combine to give consumers the wherewithal to keep powering the economy forward. But many companies are being careful not to build up too much inventory or predict too strong a sales outlook, worried that higher borrowing costs could collide with smaller savings piles and the accumulated effects of more than two years of rapid inflation to make Americans thriftier.“Sentiment definitely feels down,” Thomas Barkin, president of the Federal Reserve Bank of Richmond, said during an interview on Oct. 19. “The folks I talk to are still clamping down in preparation for 2024.”What happens with holiday shopping could help shape what the Fed does next.The central bank has been trying to slow growth for a reason: Inflation has been above 2 percent for 30 months now. To get prices under control, policymakers think they need to tamp down demand.The logic is fairly simple. If rapid hiring continues and wage gains prove quick, people who are earning more money are likely to feel confident and keep spending. And if shoppers are eager to buy restaurant dinners, new gadgets and updated wardrobes, it will be easier for companies to protect their profits by raising prices.That is why Fed officials are keeping an eye on how strong consumers and the job market remain as they contemplate what to do next with interest rates. Policymakers are almost sure to leave rates unchanged at their meeting on Nov. 1, and a number of them have suggested that they may be done raising borrowing costs altogether.Soergel’s owners are bracing for a strong season in their store selling Christmas decorations.Ross Mantle for The New York TimesBut top officials have kept alive the possibility of one final quarter-point increase, if economic data were to remain buoyant.“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.”So far, companies offer a mixed picture on the outlook. Many are suggesting that seasonal shopping is off to a strong start. Halloween spending is expected to climb to a record $12.2 billion, up 15 percent from last year’s record of $10.6 billion, according to the National Retail Federation’s annual survey. The group is expected to release its holiday forecast this week.Walmart reported strong sales during its back-to-school season, which its chief executive noted was a good indicator for how spending would look during Halloween and Christmas.“Typically when back-to-school is strong, it bodes well for what happens with Halloween and Christmas,” Doug McMillon, the Walmart chief, said on an earnings call in August.But some companies are uncertain. The Tractor Supply chief executive, Hal Lawton, said during an earnings call last week that the retailer was stocking up on fall and winter décor — selling, for instance, a skeleton cow that was a “TikTok viral sensation.”But “we acknowledge there is a broader range of estimates for holiday, consumer spending than we’ve seen over the last couple of years,” he added.And some analysts think winter shopping could prove weak. Craig Johnson, founder of the retail consultancy Customer Growth Partners, expects holiday sales to grow at 2.1 percent, the slowest since 2012, he said in a report released Oct. 17.“The fact that people had a good Halloween doesn’t necessarily mean that they’re going to have a good holiday,” Mr. Johnson said. “It’s a different buying mentality and there’s not a carryover — you’re not going to see apparel lines from Halloween extend over into Christmas.”Retailers report that they are carefully watching how much inventory they have headed into the holidays, and a Fed survey of business experiences from around the Fed’s 12 districts referenced the word “slow,” “slower” or “slowing” 69 times.Demand at the on-site hard cider shop has been solid.Ross Mantle for The New York TimesPart of the challenge in forecasting is that consumers seem to be splitting into two groups: Wealthier consumers keep spending even as the bottom tier of shoppers either pull back or look for deals.The department store chain Kohl’s says it is seeing this type of bifurcation play out in its customer base and is adjusting its stores accordingly.Shoppers at the Kohl’s in Ramsey, N.J., were greeted with a range of already-discounted Christmas items like miniature snowmen and ornaments at the front of the store. That design was done on purpose — Kohl’s executives want the section to appeal to deal-hungry shoppers.But in a sign that higher earners could fuel growth, it has also started to stock new category items like decanters, wine glasses and electric corkscrews.“We want to make sure we’ve got the right broad breadth of assortment for the breadth of customer base that we’ve got,” said Nick Jones, Kohl’s chief merchandising and digital officer. “And that’s an element of making sure everything’s got to be great value. But great value doesn’t always mean low price.” More

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    Consumers Kept Spending in September, as Inflation Held Steady

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    Overall inflation stayed at 3.4 percent in September, down from a peak of around 7 percent.American consumers spent at a robust clip last month, fresh data showed, as the economy continued to chug along even after more than a year and a half of Federal Reserve interest rates increases.The Fed’s policy moves have been intended to slow demand in order to tamp down inflation. Price increases have been slowing down: Friday’s Personal Consumption Expenditures report also showed that overall inflation held steady at 3.4 percent in September.That was in line with what economists had expected, and is down from a peak of 7.1 percent in the summer of 2022. And after stripping out volatile food and fuel for a clearer sense of the underlying inflation trend, a closely-watched core inflation measure eased slightly on an annual basis.Still, Fed officials aim for 2 percent inflation, so the current pace is still much faster than their goal.The question confronting policymakers now is whether inflation can slow the rest of the way at a time when consumer spending remains so strong. Businesses may find that they can charge more if shoppers remain willing to open their wallets. Friday’s report showed that consumer spending climbed 0.7 percent from the previous month, and 0.4 percent after adjusting for inflation. Both numbers exceeded economist forecasts.The strong spending figures are likely not enough to spur Fed officials to react immediately: Policymakers are widely expected to leave interest rates unchanged at their meeting next week, which wraps up on Nov. 1. But such solid momentum could keep them wary if it persists.“You see inflation still generally trending in the right direction, so I think they’re willing to look past this,” said Carl Riccadonna, chief U.S. economist at BNP Paribas. “If this continues for multiple quarters, then I think that maybe it starts to wear a little bit thin: If you have persistent above-trend growth, then you have to start worrying about what the inflation consequences will be.”Fed policymakers have raised interest rates to 5.25 percent, up from near-zero as recently as March 2022, and many officials have suggested that interest rates are likely either at or near their peak.But policymakers have been careful to avoid entirely ruling out the possibility of another rate increase, given the economy’s staying power.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.”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.Wrestling inflation down the rest of the way could prove to be more of a challenge. Almost all of the remaining inflation is coming from service industries, which include things like health care, housing costs and haircuts. Such price increases tend to stick around more stubbornly.For now, officials are waiting to see if their substantial rate moves so far will continue to feed through to cool the economy.There are reasons to think that growth could soon slow.“Despite the quarter-to-quarter gyrations in economic data, the Fed feels that it has restrictive policy in place,” said Mr. Riccadonna from BNP. “It’s really just a matter of waiting for the medicine to kick in, to a full degree.”Plus, a recent jump in longer-term interest rates could weigh on the economy. While the Fed sets short term rates directly, those market-based borrowing costs can take time to adjust — and they matter a lot. The jump in long term rates is making it much more expensive to take out a mortgage or for companies to borrow to fund their operations.Plus, consumers have slightly less money to spend: After adjusting for inflation, disposable income declined by 0.1 percent in September, Friday’s report showed. And global instability — including from the war between Israel and Hamas — could add to uncertainty and economic risk.“Despite the quarter-to-quarter gyrations in economic data, the Fed feels that it has restrictive policy in place,” Mr. Riccadonna from BNP. “It’s really just a matter of waiting for the medicine to kick in, to a full degree.” More

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

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    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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    Inflation Held Steady in September, While Consumers Spent Robustly

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    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