More rate hikes to come from the Fed?

<p>Kia ora,</p><p>Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news inflation is hard to beat and the US Fed is unsure it has done enough yet.</p><p>First up today, the US Federal Reserve <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20230726a.htm" target="_blank"><strong>raised its benchmark interest rates by +25 bps</strong></a> to 5.25%-5.5%, in line with market expectations. It was a unanimous decision. That takes them to their highest levels since January 2001. At this level it matches the RBNZ OCR.</p><p>Because it was expected, there was little reaction in financial markets on the announcement, with equity, bond and currency markets deciding the increase was already priced in. Perhaps the bond market is showing some caution however after the press conference. Even though markets don't expect it, the Fed did leave the door open for more increases because they seem unsure they have done enough to quash inflation.</p><p>Elsewhere in the US, <a href="https://www.mba.org/news-and-research/newsroom/news/2023/07/26/mortgage-applications-decrease-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage applications</strong></a> eased -1.8% last week, the first drop in three weeks. That fall came despite mortgage interest rates being essentially unchanged.</p><p><a href="https://www.census.gov/construction/nrs/pdf/newressales.pdf" target="_blank"><strong>Sales of new single-family houses dropped</strong></a> -2.5% in June, retreating from May's 15-month high. The June level was lower than expected. Sales in the West were down -14%, while those in the Midwest tumbled -28%. On the other hand, sales in the South rose +4.3%, and those in the Northeast surged +21%. It was an unusually mixed picture regionally.</p><p>Across the Pacific, Singapore's <a href="https://www.interest.co.nz/sites/default/files/2023-