US Fed hints at smaller future rate hikes

<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>Today we lead with news that is all about the US Fed.</p><p>As expected, <a href="https://www.federalreserve.gov/monetarypolicy/files/monetary20221102a1.pdf" target="_blank"><strong>the US Fed has raised its policy rate by +75 bps to 4%</strong></a>. It is their sixth consecutive rate hike and the fourth straight +75 bps increase, pushing borrowing costs to a new high since 2008. The odds are currently divided between another +75 bps hike at their December 15 meeting, or a lesser +50 bps rise then, although today's statement tips the chances to the +50 bps end.</p><p>Recent economic data has been pointing to an impressively resilient economy although some signs of a slowdown are starting to emerge especially in their housing market. And of course, their inflation is sticky and close to a 40-year high. Of course, this is what the new high official interest rates are designed to bring down. Remember, they have an inflation target of 2%. But the overall resilience, especially in their labour market, is making that a tough task and there is scant evidence yet that these early sharp rate hikes are making a material difference, especially to inflation expectations.</p><p>Still, the Fed suggested it is coming to the end of its series of sharp hikes.</p><p>American <a href="https://www.mba.org/news-and-research/newsroom/news/2022/11/02/mortgage-applications-decrease-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage applications</strong></a> fell again last week although not be as much as previously. And American mortgage interest rates also fell slightly, which wasn't expected. But they are still more than double the level of a year ago. Not falling are car loan interest rates, and they are now at their highest since the GFC and touching 6.3%.</p><p>The pre-cursor <a href="https://adp-ri-n