The Fed stands firm. US interest rates will remain high for a long time

The Fed stands firm.  US interest rates will remain high for a long time

Inflation is still far from 2%.

As expected, the Fed is keeping interest rates steady in the 5.25%-5.50% range as it already did in September, at a 22-year high.. This is the third time, since March, that the Fed has not intervened on the cost of money. The statement says this high level will continue for a long time because inflation remains well above the 2% target and GDP remains strong. In the third quarter, growth approached 5%. In the last press conference, President Jerome Powell did not rule out new interventions if the situation changes. Wall Street grows with the Nasdaq rising about 1 point midway through the session.

The war in Ukraine and the crisis in Palestine

It was decided to tighten the cost of money over the past year and a half to counter the rise in prices linked to global geopolitical tensions, Starting with the war in Ukraine, to which has now been added the scenario of a new crisis in the Middle East. On the macroeconomic front, the US manufacturing PMI fell to 46.7 in October from a 10-month high of 49 the previous month, well below expectations of 49, marking the 11th straight contraction for the US manufacturing sector. The critical threshold is 50 points: above this level means there is growth. Below is a recession that could turn into a recession with the gradual fall of the bank.

Decreased orders and manufacturing

The data underscored the impact of the interest rate increase, further casting doubt on the US manufacturing industry’s ability to recover. The contraction in new orders became increasingly deeper (45.5 versus 49.2 in September), representing the fourteenth consecutive decline. This is determined by the decline in national and foreign demand. As a result, production slowed (50.4 vs. 52.5), with growth almost halting due to a sharp decline in backorders (42.2 vs. 42.4) offsetting the decline in demand for new products. Meanwhile, employment tapered from last month’s rebound as factories reduced production capacity. In addition, bid prices fell for the sixth month in a row, albeit at a slower pace.

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Employment is on the rise

Instead the number of available jobs increased by 56,000 units Compared to the previous month, it reached 9.55 million in September, the highest level in the past four months, exceeding the market consensus of 9.25 million. Private companies in the United States added 113,000 workers to their payrolls in October, below market expectations for an increase of 150,000. However, new jobs continued to exceed the range of 70,000 to 100,000 needed each month to accommodate the growing working-age population, indicating that the labor market is already emerging There are signs of gradual relaxation but they remain strong, even in the face of restrictive measures from the Federal Reserve.

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