Gross domestic product is projected to have grown at an annual rate of 4.5% last quarter. The Fed has been trying to quell inflation by dampening demand while avoiding a recession. The Fed chief said that policymakers are likely to hold rates steady at their next meeting.—bloomberg.com
Category: MAT6
Macroeconomic Policy
Keywords: Federal budget, Debt, Supply-side, Fiscal stimulus, Monetary transmission
Parkin 14e Chapters 13, 14
Bade-Parkin 9e Chapters 16, 17
Parkin-Bade Canada 11e Chapters 13, 14
Parkin-Bade Australia 2e Chapters 16, 17
Parkin-Powell-Matthews 11e Chapters 29, 30
IMF Urges Central Banks to Remain Firm on Inflation
World inflation is expected to remain high despite a series of rate rises by multiple central banks. The IMF expects weaker global economic growth in 2024 and projects world inflation next year at 5.8 percent. Returning world inflation to a 2 percent target is expected to take until 2025.—ft.com
The Federal Reserve Holds Interest Rates Steady
The Federal Reserve left interest rates unchanged Wednesday, but most Fed policymakers are considering an additional rate hike before yearend. Fed chairman Jerome Powell told reporters that as the interest rate moves to the level appropriate to move inflation down to 2%, the risks become more two-sided.—npr.org
China Cuts Banks’ Reserve Ratio to Aid Recovery
China’s central bank said it would cut the reserve requirement for the second time this year to help support economic recovery. The government has also rolled out a series of policy measures in recent months.—cnbc.com
Federal Budget Deficit Expected to Nearly Double
The nation’s fiscal imbalance remains a concern. The federal budget deficit is expected to balloon to about $2 trillion for fiscal year 2023. Though budget deficits typically shrink when the economy is growing, the current deficit is high although the economy is strong.—cnn.com
Turkey Shocks With Big Rate Hike to 25% to Cool Raging Inflation
Turkey’s central bank hiked its key interest rate by a surprisingly large 7.5 percentage points to 25%, signaling a new determination to address inflation, which soared to 48% last month. President Erdogan’s past drive to slash interest rates sent inflation above 85% last year.—cnn.com
The Fed’s Favorite Inflation Measure Cooled Down Even Further in June
The Personal Consumption Expenditures price index rose 3% for the 12 months ended in June, down from 3.8% in May. The Fed uses the core PCE index as the benchmark for its 2% inflation rate target. The core PCE index showed prices increased 4.1% in June from the year before.—cnn.com
The Federal Deficit Nearly Tripled
The federal government's deficit nearly tripled in the first nine months of the fiscal year. Tax revenues decreased by 11% and government spending jumped 10%. Interest payments reached $652 billion—25% more than during the same period a year ago. The deficit adds to an already large federal debt.—npr.org
Inflation Eased to 3% in June
Inflation cooled in June, boosting chances that the Fed will stop raising interest rates. Fed officials are focused on core inflation because they see it as a better predictor of future inflation than the headline inflation rate. The U.S. economy continues to defy predictions of an economic downturn.—wsj.com
Turkey Hikes Interest Rates to 15%
Turkey’s central bank almost doubled interest rates to 15%. Annual consumer inflation has come down from 85.5% in October but was still 39.6% in May. The lira weakened further after Thursday’s rate hike news, dropping more than 2% to a new record low of 24 to the US dollar.—cnn.com