Strong US data keeps Fed from signaling it is 'done'

<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 the US central bank still sees American inflation 'elevated' above where it needs to be.</p><p>At its <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20231101a.htm" target="_blank"><strong>latest review</strong></a>, the US Fed has delivered the result markets expected, and one well signaled by the recent Fed speakers - a hawkish hold. They kept the federal funds rate at a 22-year high of 5.5% for the second consecutive time. Inflation is easing back and they seem aware of avoiding an overshoot in monetary tightening. But with the American economy defying repeated expectations of a slowdown, market expectations that the Fed is 'done' raising rates may be premature, and the Fed is clearly keeping its options open on that.</p><p>Staying in the US, the level of <a href="https://www.mba.org/news-and-research/newsroom/news/2023/11/01/mortgage-applications-decrease-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage applications</strong></a> fell -2.1% last week from the prior week. This in itself is not surprising, because it extends a long run of weakness. But it does take their current levels down to those last seen in 1995, a 28 year low. Mortgage interest rates slipped slightly in the latest week, down to 7.86% plus points for the benchmark 30 year mortgage, still close to a 23 year high.</p><p>With the American working age population growing at least +70,000 per month, it is 'positive' that payrolls rose +113,000 in October from September in the pre-cursor <a href="https://adp-ri-nrip-static.adp.com/artifacts/us_ner/20231101/ADP_NATIONAL_EMPLOYMENT_REPORT_Press_Release_2023_10%20FINAL.pdf?_ga=2.158807674.1992785394.1698859431-40974345.1696439852" target="_blank"><strong>ADP Employment Report</strong></a> on private sector payrolls,