Strong US economy could need more rate increases says Powell

<p>Kia ora,</p><p>Welcome to Friday’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 may not be over more rate hikes yet.</p><p>First up today, Fed boss <a href="https://www.federalreserve.gov/newsevents/speech/powell20231019a.htm" target="_blank"><strong>Powell has been speaking</strong></a> and trying to pitch a middle path, one that he suggests they have got policy settings about right. But he did concede that the American economy's strength including very tight labour markets could warrant more rate hikes, and they may not yet be done with the rate increases.</p><p>"We are attentive to recent data showing the resilience of economic growth and demand for labour. Additional evidence of persistently above-trend growth, or that tightness in the labour market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy," he <a href="https://www.federalreserve.gov/newsevents/speech/powell20231019a.htm" target="_blank"><strong>said</strong></a> overnight.</p><p>Meanwhile, American <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20232249.pdf" target="_blank"><strong>jobless claims fell</strong></a> by -13,000 from the prior week to 198,000 last week, the least since January and well below market estimates of 212,000. These are the seasonally-adjusted headline levels. On an actual basis there were 181,000 claims nationally last week, and there are now 1,549,000 people on these benefits, which is the lowest level in 2023 so far.</p><p>Also low are American house sales. <a href="https://www.nar.realtor/newsroom/existing-home-sales-fell-2-0-in-september" target="_blank"><strong>Existing home sales</strong></a> fell by -2% in September from the previous month to an annualised rate under 4 million units, the lowest since October 2010. They are down more than -15% f