U.S. and World News
- The Federal Reserve chose to take no action on raising interest rates at its October meeting this week. This was the consensus expectation going into this meeting and the focus now shifts to the December meeting for possible ‘liftoff’. The statement following this month’s meeting showed reduced concern about international and stock market developments. It also expressly stated that Fed officials will be considering raising interest rates at the December meeting.
- The House and Senate have passed a budget deal that would prevent the U.S. from breaching the debt ceiling next week and help avoid a government shutdown in December. The agreement will increase spending by $80 billion above the sequestration caps for military and domestic programs. Those increases would be offset by cuts in spending on Medicare and Social Security. The deal also lifts the debt ceiling through March 2017. The deal will now go to President Obama for final approval.
- In a move aimed at improving growth, China has announced that it will abandon its one-child policy and allow Chinese couples to have two children. The country experienced significant social and demographic issues relating to the 35 year old policy, as China faces an aging population that doesn’t have the workers it needs for its large economy.
- Despite rising expectations of an increase in stimulus, the Bank of Japan has kept its monetary policy on hold, holding asset purchases steady at ¥80 trillion. The decision comes amidst an output slowdown and declining consumer prices that threaten to push Japan back into deflation, something the BOJ has been fighting for two decades. BOJ Governor Hiroki Kuroda has insisted that Japan’s economy is in the middle of a moderate recovery and that the central bank has done all it can to boost growth.
- Equity markets continued to advance upwards this week. The S&P 500 ended the week up 0.22%, closing at 2,079. Similarly, the Dow Jones increased 0.10% and closed at 17,663. Year to date, the S&P is up 2.71% and the Dow has gained 1.05%.
- Yields in the Treasury markets moved higher this week. The 10 year Treasury bond now yields 2.15% while the 5 year Treasury bond now yields 1.52%.
- The spot price of WTI Crude Oil rose this week. Prices increased by 4.00% closing at $46.38 per barrel. In 2015, WTI Oil prices are down 21.98%.
- The spot price of Gold decreased this week, losing 1.92% and closing at $1,142.11 per ounce. Year to date, gold prices are down 3.57%.
- Initial jobless claims came in at 260,000 which was an increase from the prior week’s figure of 259,000. The Labor Department noted that there were no special factors that affected the claims figure. The four week moving average for claims now stands at 259,000, which is a new low for this economic cycle.
- The price index for personal consumption expenditures (PCE, measure of inflation) declined by 0.1% in September as was expected given the further drop in energy prices. The Core PCE measure (excluding food and energy) rose 0.15% during the month, bringing the one-year figure to 1.3%, well short of the Federal Reserve’s 2% target.
- The Employment Cost Index (ECI, measure of wage inflation) increased by 0.6% during the 3rd quarter, in line with expectations. Over the past 12 months, compensation has increased by 2.0%.
- The first estimate of 3rd quarter GDP showed growth of 1.5%, according to the Commerce Department’s report. The figure reflects solid growth in consumer spending with an offsetting drag from slow inventory accumulation.
Fact of the Week
- According to the Federal Reserve, as of August 31st the total outstanding credit card debt in the U.S. was $918.5 billion. This translates to an average of $8,004 of credit card debt for every household in the country.
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