Powell says rate hike pause temporary

<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 markets seem to have decided China isn't doing anywhere near enough to reverse their economic challenges.</p><p>But first, Fed boss Powell has been presenting the central bank's <a href="https://www.federalreserve.gov/monetarypolicy/files/20230616_mprfullreport.pdf" target="_blank"><strong>Semi Annual Monetary Policy Report</strong></a> to Congress today and in <a href="https://www.federalreserve.gov/newsevents/testimony/powell20230621a.htm" target="_blank"><strong>testimony</strong></a> he said "Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year." He suggested that another +50 bps could come by the end of 2023 and taking their policy rate to 5.75% and taking it higher than even the rates that applied before the GFC. Bond markets ignored the comments but the currency markets marked the USD down. Equity markets dipped too.</p><p>And we should note that the debt-limit deal struck by the White House and congressional Republicans requires that the pause on student loan payments be lifted no later than the end of August. Analysts are starting to factor in some pretty significant economic implications when that happens.</p><p>The American <a href="https://www.mba.org/news-and-research/newsroom/news/2023/06/21/mortgage-applications-increase-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage market activity rose</strong></a> again last week from the prior week, and unusual expansion even if it was minor recently. Mortgage interest rates slipped slightly with their benchmark 30 year down to 6.73% plus points.</p><p>There was also a rise last week in <a href="https://www.redbookresearch.com/" target="_blank"><strong>a key retail sales indicator</strong></a>, but despite that it remains mir