“Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting” - FOMC
The minutes of the FOMC meeting in October reinforced the view that the Fed may finally hike interest rates as soon as next month, given job growth and inflation trends remain resilient and continue to improve. Yet, Fed officials remain divided, as some policy makers doubted that economic data available by the December meeting would warrant raising the target range for the federal funds rate. Markets seemed to be getting used to the idea of higher rates in the near future, as the US central bank has now warned about rate hikes so many times. While stocks usually tumble amid increase in rates, equities rose Wednesday, a sign that a rate hike is already prices into markets. Meanwhile, US housing starts dropped to the lowest level in seven months in October, while a surge in building permits signalled the housing market remained on firm footing. Groundbreaking plunged 11% to a seasonally adjusted annual pace of 1.06 million units, according to the Commerce Department. Moreover, September’s figure was revised down to a 1.19 million unit pace, down from 1.21 million units. Nevertheless, October marked the seventh consecutive month that starts remained above 1 million units, the longest such streak since 2007. Housing has contributed to economic output growth in each of the last six quarters and is absorbing some of the slack from a sluggish manufacturing sector. Meanwhile, building permits soared 4.1% to a 1.15 million unit rate in October.
“Japan's economy has continued to recover moderately, although exports and production have been affected by the slowdown in emerging economies” - Bank of Japan
The Bank of Japan maintained its monetary policy, hoping that an economic recovery is around the corner despite soft domestic capital expenditure and uneasy global business conditions. As widely expected, the central bank reiterated its pledge to increase base money at an annual pace of 80 trillion yen through purchases of governments bonds and risky assets. The BoJ has kept monetary policy unchanged since expanding stimulus in October last year, even as falling oil prices and weak exports push Japan’s inflation further away from its goal. The BoJ repeated its view that the world’s third biggest economy continued to recover moderately, although production and exports have been hit hard by the slowdown in emerging markets. The central bank admitted that an annual change in the consumer inflation is likely to be around 0% for the time being, due to the effects of the energy prices drop. The BoJ sees risks to Japan’s economic outlook stemming from developments in the emerging and commodity-exporting economies, the debt problem and the pace of economic activity and prices in Europe, as well as the recovery in the US economy.