US Fed signals QE taper and rate rises

<p>Kia ora, </p><p>Welcome to Thursday's Economy Watch where we follow the economic events and trends that affect 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 the Fed has pulled the trigger on tapering.</p><p>The US Federal Reserve <a href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20210922a.htm" target="_blank"><strong>said</strong></a> this morning that the US economy has <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210922.pdf" target="_blank"><strong>made progress</strong></a> toward employment and inflation goals and that if progress continues broadly as expected, a reduction in the pace of asset purchases may soon be warranted. The Fed also signaled interest rate may need to rise faster than initially expected, with 9 of 18 policymakers <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210922.pdf" target="_blank"><strong>projecting</strong></a> borrowing costs to rise in their dot plot for 2022. Their signals for the move higher from there is even stronger.</p><p>Meanwhile, the partisan standoff on the US debt ceiling continues. Congress achieved the easy part - getting the House to approve. The hard part looms, Senate approval. Janet Yellen is frustrated, <a href="https://home.treasury.gov/system/files/136/Former-Treasury-Secretaries-Letter-to-Congressional-Leadership-on-the-Debt-Limit-9-22-21.pdf" target="_blank"><strong>as are most</strong></a> former Treasury Secretaries. If it continues, a credit rating downgrade is entirely possible for the US. It is not unprecedented.</p><p>US <a href="https://www.nar.realtor/newsroom/existing-home-sales-recede-2-0-in-august" target="_blank"><strong>existing home sales slipped</strong></a> in August by -2%, dampened by high prices and low choice. There is 11 weeks supply at current sales levels which is low for them. But there is a stirring in their <a href="https://www.mba.org/2021-press-releases/september/mortg