Wall Street's dovish bets about to be tested

<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 we are waiting on the US Fed.</p><p>Financial markets are in limbo, cautious ahead of the US central bank's monetary policy meeting results that will be released at 8am NZT today. We will update our webside when these details are released. They are widely expected to keep the fed funds rate steady at 5.5% for a third consecutive meeting and push back against expectations of rate cuts early next year. Back in September, the Fed's dot plot indicated two cuts in 2024, but Chairman Powell recently deemed it premature to discuss rate decreases. They will release new economic and rate forecasts which will be closely watched and parsed.</p><p>Meanwhile <a href="https://www.bls.gov/news.release/ppi.nr0.htm" target="_blank"><strong>American producer prices</strong></a> were unchanged in November from October to be just +0.9% ahead of year-ago levels - and that was a lower increase than expected. Consumer inflation might be stubborn but producer prices are now rising at very modest levels. Recall, US PPI peaked at more than +11% pa in early 2022.</p><p>American <a href="https://www.mba.org/news-and-research/newsroom/news/2023/12/13/mortgage-applications-increase-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage applications rose</strong></a> an unexpected +7.4% last week from the week before, a sixth consecutive weekly and driving applications to their highest level in over four months, thanks to the continuous decline in interest rates. The benchmark 30 year fixed home loan rate is now down to 7.07% in this survey, it lowest since July.</p><p>In China, the expected bounce-back from October's weak new lending levels came but it wasn't as robust as expected. China's banks extended almost ¥1.1 trillion in <a href="http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/5