The US Federal Reserve has been driving up US borrowing costs ever since June 2004. That could be about to change, economists believe after compelling evidence that the US economy is hitting the brakes.
The central bank's Federal Open Market Committee (FOMC) meets tomorrow to decide whether to continue with 17 straight hikes that have pushed the headline US interest rate up to 5.25 percent.
If the majority of Fed-watchers on Wall Street are correct, Chairman Ben Bernanke and his FOMC colleagues will decide that enough is enough, after rates had sunk to historic lows in response to a 2001 recession.
"We look for them to leave the rate unchanged for a long period and not just a short-term pause," Societe Generale economist Stephen Gallagher said.
"The Fed has been on the fence, faced with higher inflation and slowing growth. The desire has been to pause, provided inflation and inflation expectations could stabilize," he said.
"This [Friday's] employment report adds to softening evidence on the economy and will restrain inflation expectations," Gallagher said.
In the last big piece of economic news before the FOMC session, the government said on Friday that US employers added just 113,000 new jobs last month, while the jobless rate ticked up to 4.8 percent from 4.6 percent in June.
It was the fourth straight month that the Labor Department's "non-farm payrolls" report had proven tepid. Most worrying for an economy driven by consumer spending, retailers are proving most reluctant to take on new staff.
Slower consumer spending on the back of a cooling property market was to blame for second-quarter growth slipping to 2.5 percent, after GDP expanded at a red-hot pace of 5.6 percent in the first three months.
"Weak second-quarter GDP growth, and a smaller-than-expected gain in July's payroll employment, mean that the Fed is likely to take a breather at Tuesday's FOMC meeting," Global Insight chief economist Nariman Behravesh said.
"However, all the inflation indicators are flashing yellow and may soon be flashing red," he said.
"The Fed's statement on August 8th will continue to leave the door open for further hikes -- or cuts -- if necessary," he said.
Because of a startling rally in the commodities markets, US businesses are now being forced to pass on price increases to their customers as they themselves pay more for their supplies and raw materials.
Years of productivity growth helped to keep a lid on inflation, but now wage pressures are clearly building, as shown by a 0.4 percent increase in average hourly earnings that was outlined in Friday's jobs report.
Bernanke, however, has said that he believes cooling growth should curb inflation in the coming months, despite the wage pressures and high energy prices.
ALL-IN-ONE: A company in Tainan and another in New Taipei City offer tours to China during which Taiwanese can apply for a Chinese ID card, the source said The National Immigration Agency and national security authorities have identified at least five companies that help Taiwanese apply for Chinese identification cards while traveling in China, a source said yesterday. The issue has garnered attention in the past few months after YouTuber “Pa Chiung” (八炯) said that there are companies in Taiwan that help Taiwanese apply for Chinese documents. Minister of the Interior Liu Shyh-fang (劉世芳) last week said that three to five public relations firms in southern and northern Taiwan have allegedly assisted Taiwanese in applying for Chinese ID cards and were under investigation for potential contraventions of the Act Governing
‘INVESTMENT’: Rubio and Arevalo said they discussed the value of democracy, and Rubio thanked the president for Guatemala’s strong diplomatic relationship with Taiwan Guatemalan President Bernardo Arevalo met with US Secretary of State Marco Rubio in Guatemala City on Wednesday where they signed a deal for Guatemala to accept migrants deported from the US, while Rubio commended Guatemala for its support for Taiwan and said the US would do all it can to facilitate greater Taiwanese investment in Guatemala. Under the migrant agreement announced by Arevalo, the deportees would be returned to their home countries at US expense. It is the second deportation deal that Rubio has reached during a Central America trip that has been focused mainly on immigration. Arevalo said his
‘SOVEREIGN AI’: As of Nov. 19 last year, Taiwan was globally ranked No. 11 for having computing power of 103 petaflops. The governments wants to achieve 1,200 by 2029 The government would intensify efforts to bolster its “Sovereign Artificial Intelligence [AI]” program by setting a goal of elevating the nation’s collective computing power in the public and private sectors to 1,200 peta floating points per second (petaflops) by 2029, the Executive Yuan said yesterday. The goal was set to fulfill President William Lai’s (賴清德) vision of turning Taiwan into an “AI island.” Sovereign AI refers to a nation’s capabilities to produce AI using its own infrastructure, data, workforce and business networks. One petaflop allows 1 trillion calculations per second. As of Nov. 19 last year, Taiwan was globally ranked No. 11 for
STAY WARM: Sixty-three nontraumatic incidents of OHCA were reported on Feb. 1, the most for a single day this year, the National Fire Agency said A total of 415 cases of out-of-hospital cardiac arrest (OHCA) occurred this month as of Saturday, data from the National Fire Agency showed as doctors advised people to stay warm amid cold weather, particularly people with cardiovascular disease. The Central Weather Administration yesterday issued a low temperature warning nationwide except for Penghu County, anticipating sustained lows of 10°C or a dip to below 6°C in Nantou, Yilan, Hualien and Taitung counties, as well as areas north of Yunlin County. The coldest temperature recorded in flat areas of Taiwan proper yesterday morning was 6.4°C in New Taipei City’s Shiding District (石碇). Sixty-three nontraumatic OHCA
RSS