The latest economic data showed inflation continuing to cool beneath the surface even as the Federal Reserve resumed raising interest rates. Higher energy costs, resilient consumer spending and a softening housing market create competing forces across the economy.
- The Federal Reserve raised its benchmark interest rate by 25 basis points, increasing the target range to 3.75% to 4% following its September meeting.
- The rate increase received unanimous support from policymakers, with all 12 voting members backing the decision after several officials dissented at the previous meeting.
- According to the Fed's updated economic projections, 16 of 18 officials expect at least one more rate hike this year, while four policymakers anticipate two additional increases before year-end.
- New unemployment claims data pointed to ongoing labor market strength, supporting the Fed's view that the economy can withstand further monetary tightening.
- Consumer Price Index data showed core inflation slowing to 2.4% year-over-year in August, reaching the lowest reading since 2021.
- The same CPI report indicated that shelter inflation eased to 3%, continuing a trend of moderating housing-related price pressures.
- Energy prices remained a concern, with gasoline prices up 27% from a year earlier, diesel prices at record levels and oil prices surpassing $100 per barrel.
- August retail sales increased by more than 1%, according to federal consumer spending data, even as consumer sentiment measures remained near record lows.
- Housing market reports showed existing home sales dropping below a 4 million annualized pace, inventory rising to nearly five months of supply and contract signings remaining roughly 30% below pre-pandemic levels.
- Construction and housing finance data reflected growing pressure from higher borrowing costs, with apartment starts falling more than 20%, apartment completions running 35% below year-ago levels and mortgage rates reaching 7%.
For more information on the state of the U.S. Economy, including forecasts, watch all the episodes of the Economy Express series.
