The Line: Another Federal Reserve Meeting Without Any Changes to Rates

Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.

Today, the latest from the Fed with a side of jobless claims. The Federal Reserve announced on Wednesday that it’s keeping rates where they are, even though inflation is near a 13-year high. Why do they keep putting off rate hikes that are clearly needed? Boy, the Fed is punting more than the Jets these days! For what it’s worth, the Fed is indicating it will push up their rate-hike schedule, which originally called for no action until 2024. Before that can happen, the Fed wants to bring the $120 billion in bonds it buys each month down to zero. That means the earliest we’ll see any rate hikes will be the end of next year. The Fed also made some adjustments to their economic forecasts, lowering its GDP growth forecast for this year from 7.0% to 5.9%. They also expect the unemployment rate to be a bit higher than their June forecast of 4.5%. What’s interesting is that they expect slower economic growth and higher unemployment than their previous forecast, but they’ve raised their inflation projection from 3.4% to 4.2%. No wonder that some economists are starting to mention the word “stagflation” a lot these days.

Their next meeting is the first week of November. Hopefully they will at least announce a plan to stop their bond purchases, since they seem committed to keeping rates unnecessarily low for at least another year.

Weekly Jobless Claims Much Higher than Expected

Initial claims for unemployment rose to 351,000 last week, well above the Dow Jones estimate of 320,000. This was the highest reading for jobless claims in a month. The biggest increases last week were in California (+24,221) and Virginia (+12,879). Continuing claims, which trail initial claims by one week, rose by 131,000 during the week ending September 11. This was the biggest weekly increase in continuing unemployment claims in four months. Is this really bad news? No. The four-week moving average for initial claims, which is less volatile than weekly data, fell to a pandemic-era low of just under 336,000. So, despite this week’s hiccup, jobless claims are still heading in the right direction. Subscribe here to receive The Line in your inbox.