November 5, 2024

Fed Raises Interest Rates, Showing Confidence in Health of Economy

On Wednesday, a group of United States financial regulators — which includes the Fed — warned that the trade fight with China had the potential to “materially impact U.S. economic growth.”

FedEx, a bellwether for the global economy, on Wednesday sharply reduced its profit outlook for 2019 and announced plans to cut jobs, citing a deterioration in demand for its shipping services.

Fred Smith, the company’s chief executive, blamed the Trump administration’s trade policies.

“Most of the issues that we’re dealing with today are induced by bad political choices,” Mr. Smith said, specifically citing Mr. Trump’s decisions to impose tariffs on a wide range of foreign goods.

There are also signs that the Fed’s march toward higher rates is weighing on sales of homes and autos.

“The era of low auto loan rates is clearly behind us,” said Jonathan Smoke, chief economist at Cox Automotive, which gathers data on the auto industry. Mr. Smoke said the average monthly payment on a new car in November was $567, a 5 percent increase over November 2017. “If rates are indeed even higher in 2019, the buyer pool for new vehicles could further decline,” he said.

Mortgage rates, less directly tied to Fed policy, have also climbed, contributing to a recent softening in the sales of new and existing homes. The average interest rate on a 30-year fixed-rate mortgage was 4.63 percent last week, up from 3.93 percent a year ago, according to Freddie Mac.

Mr. Powell said these developments “may signal some softening relative to what we were expecting a few months ago.” He added that he was aware of the increasingly dour mood among business executives. A survey of corporate chief financial officers published by Duke University last week found that almost half expected the economy to enter a recession next year.

Article source: https://www.nytimes.com/2018/12/19/business/fed-interest-rates.html?partner=rss&emc=rss

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