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Weekly Economic & Financial Commentary: Will the FOMC Slow the Pace of Tightening in Coming Months?

Summary

United States: FOMC Still Has Cover to Focus on Inflation

  • Employers continued to add jobs at a steady clip in October, demonstrating the labor market remains tight and the FOMC will continue to tighten policy. The size of the December rate hike depends on the incoming data. October payrolls do not move the needle much toward a 75 bps hike, and they give the Fed cover to continue to focus on inflation.
  • Next week: Small Business Optimism (Tue), CPI (Thu), Consumer Sentiment (Fri)

International: Bank of England Hints at a Slowdown

  • The Bank of England (BoE) raised its policy rate aggressively at this week’s monetary policy announcement, raising its Bank Rate by 75 bps to 3.00%. The increase matched the consensus forecast; however, there were also signals from the BoE that the pace of tightening will likely slow going forward.
  • Next week: Brazil CPI (Thu), Mexico Rate Decision (Thu), UK GDP (Fri)

Interest Rate Watch: Will the FOMC Slow the Pace of Tightening in Coming Months?

  • For the first time in this rate hiking cycle, the FOMC said that it would take into account the cumulative amount of tightening when deciding future monetary policy moves. Does a slower pace of tightening lie ahead?

Credit Market Insights: Raising the Bar: EU Lending Standards Tighten in Q3

  • Last week, the European Central Bank (ECB) released its Bank Lending Survey for Q3-2022. Bank participants in the survey indicated that there was a net tightening of credit lending standards in the face of decades-high inflation and recession fears, with standards tightening for enterprises, home purchases and consumer credit.

Topic of the Week: Homeownership Rises Over the Year, but Affordability Challenges Persist

  • The latest Quarterly Residential Vacancies and Homeownership report was released on Wednesday. The report shows that the U.S. homeownership rate was 66.0% in the third quarter, up 0.6 percentage points over the year.

Full report here.

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