Several factors are blurring the US economic outlook. Starting with strikes in the automobile industry and the entertainment sector, together with a lack of consensus in the Congress on federal financing, that may lead to a partial government shutdown, while regular unleaded gasoline prices are ominously approaching $4 per gallon, an increase of 20 percent since January.
This combination of uncertainties confirms the posture, previously announced by the central bank, to “proceed cautiously.” Last week’s Open Market Committee meeting decided to pause and left interest rates unchanged. As declared by Federal Reserve chairman Jerome Powell, “given how far we’ve come and how quickly we’ve come, we’re actually in a position to be able to proceed carefully as we assess the incoming data and the evolving outlooks and risks.”
At the end of the last Committee meeting, a new set of economic projections revealed there still may be another rate increase this year, which may happen in one of the two meetings scheduled for the end of October and mid-December. As described by Chairman Powell “a soft landing is a primary objective,” that is to reduce inflation without causing a recession. Additionally, the projection for next year is that interest rates will remain above 5 percent, which was not well received in Wall Street.
