9/9- Weekly Economic Highlights
Sep 9, 2022 | Weekly Highlights
The European Central Bank (ECB) raised interest rates by 0.75% for the first time in its history on Thursday in an attempt to contain Eurozone inflation. ECB President Christine Lagarde also implied that additional rate hikes this year are likely. In the US, Federal Reserve (Fed) Chair Jerome Powell, along with Federal Open Market Committee (FOMC) voting members Lael Brainard, James Bullard, Esther George and Christopher Waller all indicated this week that they are supportive of continued rate hikes. Market participants have mostly priced in a 0.75% rate increase at the next FOMC meeting on September 21.
Meanwhile, the Fed’s Beige Book, which is a detailed report of current economic conditions, indicated that economic growth in the US has slowed, with declines in gasoline prices partially offset by increases in other areas such as food, shelter and services.
The Institute for Supply Management (ISM) Services Index came in better than expected for August at 56.9, indicating that the US economy is absorbing tighter central bank monetary policy relatively well so far. Readings over 50 reflect an expansion in the service sector of the economy.
US Treasury rates moved higher as nearly $53 billion of investment grade corporates were issued earlier in the week, along with the Fed doubling the pace of its balance sheet runoff starting this month from $47.5 to $95 billion per month of US Treasuries and agency mortgage-backed securities. The Federal Reserve ramped up the size of its balance sheet to almost $9 trillion to improve liquidity in the capital markets and to provide monetary accommodation to support the economy during the pandemic.
The upcoming full slate of economic data will inform the Federal Reserve’s rate decision on September 21, with key reports on inflation and the health of the US consumer.
Consumer Price Index, Producer Price Index, Advance Retail Sales, Industrial Production, University of Michigan Sentiment
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