Jerome Powell Is Popular. His War on Inflation Could Change That.

    The article emphasizes the possible risks from the outcome of Jerome Powell's war against inflation and how it could bring about a legacy that Jerome Powell would not like to be remembered for. Jerome Powell's administration decided to raise interest rates very quickly (the fastest rise in more than 40 years) to curb inflation in the economy recently. With the decision made by the Jerome Powell administration, the economy could be at risk.

     Powell could either reduce it back to normal quickly (Back Track his plan) which would lead to what happened during the period of Arthur Burn's administration in the 1970s, or stick to his decision, which if not carefully watched, would lead to recession, just as Paul Volcker's administration in the 1980s (1982). The disadvantage of backtracking before inflation is curbed is that people expect high-interest rates and that would result to rapid price increases to linger. The disadvantage of sticking to it before inflation is curbed is that unemployment would rise rapidly because the cost of wage per labor would increase due to the high-interest rate, which then would lead to recession. 

    From the news article, I believe consumers and banks are most fearful of the extreme case of recession than a case of a rapid price increase, which is enough reason for Jerome Powell to backtrack his way in order to prevent a recession. But the personality of Jerome Powell, I believe Powell will not want to break track, even stating that "We will keep at it until we are confident the job is done".

    In my opinion, I believe what Jerome Powell is expecting is a warning sign before he reduces interest rates, which might not happen. From the new article, during Paul Volcker's administration, the unemployment rate started to increase before the recession kicked in. But unfortunately, with the presence of hybrid and online jobs being offered, the unemployment rates would continue to decrease. The decrease in in-person jobs opportunity as a result of high-interest rates would not easily be shown in the unemployment rate. In conclusion, if Jerome Powell can get his hands on the unemployment rates of hand-skilled jobs (such as farmers, builders, carpenters, and car dealers), he can notice from there, when the spikes occur and not be fixated on the real unemployment rates which have been affected by the presence of hybrid and online jobs which fits people comfort.

https://www.nytimes.com/2022/10/31/business/economy/jerome-powell-fed-inflation.html#:~:text=That%20could%20allow%20officials%20to,in%20the%201980s%20so%20far.

Is the US headed toward a housing crash? Experts say it’s not 2008

 Increased mortgage rates, a decline in home sales, and a record high price slowdown, all leads many analysts to believe a crash is soon to come. Mortgage rates have been over 7%(first time in two decades). Home Price has decreased 2.6% in August, and home sales has dropped 11% in September. 

Some say this is the housing market getting ready to crumble while others believe it is just steadying out. During covid, the governments goal was to stimulate the economy. By doing so, mortgage rates were next to nothing. Today, mortgage rates are sky high in hopes to combat inflation(but isn't doing that great of a job). Since the 2008 crisis, economists have worked to fix what they did wrong in the past, so there is still hope for this second go around.

"the housing market boomed because of extremely low mortgage rates, intense competition bolstered by low inventory and remote work options, and soaring home prices."

https://www.google.com/amp/s/thehill.com/policy/3710099-is-the-us-headed-toward-a-housing-crash-experts-say-its-not-2008/amp/

China GDP Data Is Unexpectedly Released After Delay

    The leader of China, Xi Jinping, has been making changes to how the countries economy is shaped and on paper it looks like a good thing. Amidst an almost global halt or recession in county's GDPs, China has increased their GDP from Q2 by 3.9%. The results were slightly delayed, leaving some questioning how reliable these number are but just looking at the overall change things are looking up in China. During this delay, Xi took the opportunity to reorganize the other leaders with him, giving the people loyal to him higher positions and demoting some of the nations top economic minds. In the new GDP data, the statistic show that the 3.9% increase was due to a massive increase in national security spending. There was even drops in the financial markets, currency power, employment, and overall economic growth. This new concept of business showed change in the short run but has not sustainability in the long run and will soon deteriorate the Chinese economy. 

    This biggest impact Xi has made on the Chinese economy is the focus on restricting the technology sector. This is a major source of income for the country, who produces and exports many to all of our devices that we use today. These planned restrictions will continue to eat at the Chinese GDP and will lead to not so favorable data for Xi and his country. Private property developers are having to default on debts and business tycoons are leaving the country in search of a more welcoming economy. The policies that are being put in place are hurting the countries economy and will lead to a decrease in GDP.

    This information about the economic unrest in China is important for Americans because when the country had their last recession in 2008, they highly relied on China's strong economy for support. With the glooming recession that America is about to face, a weaker Chinese economy is not something either country can afford right now. Both countries will be faced with hard times and neither will be able to help the other with a strong currency and/or economy. Hopefully there is another country that can maintain stability in their economy in the near future to help support economies around the world.

https://www.nytimes.com/2022/10/23/business/china-gdp-economy.html

US economy grows, despite surging inflation

 The U.S. economy grew at a 2.6% annual rate from July through September, a strong comeback after the GDP shrank in the first two quarters of the year. The resurgence comes as consumers and businesses are grappling with soaring inflation and as rising interest rates rapidly cool the housing market. The outlook for the world economy grows bleaker, the longer that Russia's war against Ukraine drags on. In the short-term, the latest growth figures are likely to ease concerns that the U.S. is on the brink of a recession. But the stronger than expected economic activity in last quarter raises concerns that the FED will continue to aggressively drive up interest rates. Economists say they expect economic growth to slow in the fourth quarter as the boost from exports decreased. But a bigger concern may be whether the U.S. could enter a recession within the next year, Hiring has been decelerating, although employers have added an average of 420,000 jobs a month this year, putting 2022 on track to be the second-best year for job creation, behind 2021, in Labor Department records going back to 1940. The unemployment rate was 3.5% last month, matching a half-century low, job growth is likely to slow further in October. The future outlook remains bleak as a recession is expected but not before the start of the new year.

Dow Closes Lower on Monday, But Still Posts Best Month Since 1976

 According to the article posted on Oct 31 at 5:47pm, the Dow fell 0.39%. While the S&P 500 shed 0.75% and the Nasdaq Composite fell 1.03%. But for the month of October all of them have made comebacks with the Dow gaining the most of 13.95%, the S&P 500 8% and Nasdaq 3.9%. This is the best gain the Dow has had since 1976. Mainly because of investors investing in more traditional companies like banks, which lead to the next bull in the economy. All of this increase is in spite of slowing growth from tech companies causing mixed earnings. 

https://www.cnbc.com/2022/10/30/stock-market-news-futures-open-to-close.html

The Fed is Expected to Raise Rates by 75 Basis Points to "Lay the Ground Work for a Step Down"

 The Fed is expected to raise interest rates by 75 basis points. After two days of Federal Open Market Committee, they are expected to raise rates for the fourth meeting in a row. It is also expected that the central bank will stand down a bit on their stance to help lower inflation and to slow down the rapid growth of rates. Michael Pearce, a senior US Economist of Capital Economies, wrote a letter to clients saying, "We do expect Chair Jerome Powell to… use the post-FOMC press conference to lay the ground for a step down in the pace of rate hikes". 

After the September meeting, officials felt that the central bank could have slowed the pace of rate hikes so they could've assess the impact and damage that previous rate hikes have made on inflation. Fed officials are also expected to think about balancing raising rates to cool down the current rate of inflation. This will run the risk of rates getting too high and creating a recession. Mary Daly, President of the San Francisco Fed says that the Fed should be "talking about 'stepping down' when inflation show signs of abating".

Domestic demand appears to be being pushed down by high interest rates according to data. Final sales to private domestic purchasers only increased by 0.1% this past quarter, a significant step down from the increases compared to the first two quarters of the year, that being 0.5% in the second quarter and 2.1% in the first quarter. 

Consumer spending also seems to be having a hard time, as imports fell by 7% in the third quarter. Along with that, job markets are slowing down with job openings falling as well. The job report that will be released on Friday only projects that 200,000 nonfarm payroll jobs were created. This is significantly lower than the monthly average of 2022, that being 420,000. The employment cost index was raised by 1.2% this past quarter, which shows that the inflationary pressures are getting lighter. The official measures aren't easing as quickly as they were hoping it to. The PCE only rose by 5.1%, much higher than their goal of 2%. They are also projecting interest rates to raise between 4.5%-5% to help lower inflation down to their 2% goal.

This is an interesting article because this is projecting what we could expect from the economy and the potential recession that will occur from the inflation and interest rate hikes. 

https://finance.yahoo.com/news/fed-expected-to-again-raise-rates-223821317.html

Inflation in everything but pay

    The prices of the Wendy's baconator have risen and people have taken to tik-tok to talk about the inflation of prices of the baconator. While it appears based on price listings that the claim of a $14 baconator is exaggerated it still is clear that the prices are higher than they have been in the past, but people in the comments have taken to a discussion of how the prices have changes but their wages have not.

    It is interesting seeing how people have taken to talking about the economy over different social media platforms as a way to spread information and discuss things like inflation and wages. I am curious to see how platforms like tik-tok and discussion about this will impact the economy if at all because many companies may not see posts like these at all or if they do ignore them and write them off as just whining about little things when they may actually be a much bigger deal and paying attention to what people say could help some companies tremendously with getting more workers with better work ethic,

 'Everything Is Going Up Besides Our Pay': Wendy's Customer Is Flabbergasted By Having To Pay $14 For A Combo Meal (msn.com)

The Fed may have to blow up the economy to get inflation under control

This article discusses the implications of the Fed’s policies in recent times while looking ahead to the releases of new data, and the changing leadership of the Fed. It is looking likely that the Fed will raise interest rates again this Wednesday by 0.75 percentage points as they continue to battle inflation. The article raises the question that many Americans have been questioning, namely whether the current fiscal policy will lead us into a recession. However, as pointed out by the business writer, Paul La Monica, this situation is not something that the Fed has much experience dealing with, noting that previous Fed electives have never had to raise rates by such a significant margin this many months in a row. With that being said, there have already been signs of the housing market showing strain, as well as bond yields spiking.

One of the main worries which are referenced in the article is that policymakers will not slow down to think of the lag effect that raising interest rates can create. Current changes in policies will likely only show at a point much later than the initial change. On top of this, with the rotation of regional Fed presidents occurring in early 2023, there will likely be a change in the willingness to follow current policies.

The article also looks toward the upcoming release of labor market data, where growth is expected to continue but at a much slower rate than previously experienced so far in 2022. Even with this being the case, the labor market remains tight and has experienced an increase in average hourly earnings that have been higher in the last 12 months than in previous years. The article closes with a quotation from economists at the Hamilton Group; “The pace of hiring is very high, unsustainable, and is pushing up wages and inflation”.

           

https://www.cnn.com/2022/10/30/investing/stocks-week-ahead/index.html

Federal Reserve Expected to Raise Interest Rates

 This coming week, experts expect the Federal Reserve to raise interest rates to stop inflation again. This would make it the 6th week in a row that the Federal reserve has raised interest rates. The 6 consecutive rises in interest rates strongly signal a panic at the federal level about inflation, this should not come as a surprise to most people who have been paying attention to the economy at all, because inflation has been rising for more than 6 months. 

If the Fed does increase the interest rates this could affect the general public in a few ways. The first and most common would be credit cards. Since credit card interest rates are variable a hike in Federal Interest Rates could easily trigger credit card companies to raise their interest rates at the same or higher level as the Federal Reserve. CNBC reports that rates have already raised from 16.3 percent at the beginning of 2022 to almost 19 percent here in October. 

The same goes for Auto Loans and many other types of small loans have already increased their interest rates and are expected to keep rising if the fed does keep the interest rates increasing. Auto loans have already increased from 3.86% to 5.63% and are expected to rise to 6% by the end of the year.

https://www.cnbc.com/2022/10/31/another-fed-rate-hike-is-on-the-way-heres-how-it-could-impact-you.html 

Unexpected rise in inflation despite the rate hikes

 CPI increased by 0.4% for the September 2022 and the October data will be released on at 8:30am Eastern time 10th November 2022. The food index made headlines after jumping 0.8% which was similar to the month of August and was up by 11.2% from last year. Inflation is continuing to rise despite the efforts of the Fed to keep to keep prices under control. 9,000 increase in the jobless claims from last year indicated that the layoffs are still low.

Consumer price index September 2022: (cnbc.com)