March 28, 2024

Fed Signals a Rate Cut Remains Possible, Despite Glimmers of Economic Hope

Even if those uncertainties clear up, data increasingly suggest that economic damage is already materializing.

A global slowdown is well underway. The International Monetary Fund lowered its expectations for global growth in 2019 to 3 percent, the lowest rate since the financial crisis, in projections released Tuesday. Manufacturers around the world are slumping, and the American factory sector has pulled back markedly.

The United States’ economic strength has hinged on everyday consumers, whose spending makes up about two-thirds of the economy. But there are early signs that households might be cracking: Retail sales unexpectedly declined in September, data this week showed.

Policymakers have seen a strong job market and climbing wages as positives that should keep households feeling good. But employment gains have begun to slow, and both average hourly earnings and a broader measure of wages and benefits have grown more gradually in recent months, suggesting that business caution may be spilling over.

Despite mounting warning signs, the housing market is holding up, bolstered by Fed rate cuts in July and September. While overall output growth is slowing, that was expected as stimulus from Mr. Trump’s 2017 tax cut faded, and gains remain at or above the economy’s longer-term trend.

“This is a fluid situation — you’ve got a lot of uncertainty,” Robert Kaplan, president of the Federal Reserve Bank of Dallas, told reporters on Friday at an event in Washington. Though he does not have a vote on monetary policy, he does sit at the decision-making table.

He remains “agnostic” about whether a cut is needed this month, he said, and wants to keep the Fed’s options open.

Article source: https://www.nytimes.com/2019/10/18/business/economy/fed-rate-cut-economy-slowdown.html?emc=rss&partner=rss

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