- Last week, the Federal Reserve (Fed) raised its target federal funds rate (the overnight lending rate it charges banks to borrow money) by 0.25% for the third time this year, citing continued confidence in the economy and a strong job market. The central bank also indicated the possibility of up to three more hikes in 2018. Such increases by the Fed can have a downstream effect of pushing credit-card and loan rates higher.
- Consumer prices grew by 0.4% in October and 2.2% year over year; clothing and medical-care costs mitigated the effects of climbing energy prices. The more closely followed core rate (which excludes food and energy) eased to 1.7%. Producer prices rose by 0.4% for the month, as energy expenses gained and trade-service prices declined.
- Import prices increased by 0.7% in November, driven by higher energy costs, while nonfuel prices were unchanged. Year-overyear growth climbed by 3.1%, as a weak U.S. dollar continued to support underlying inflation. Export prices advanced by 0.5% in November, bringing the year-over-year gain to 3.1%.
- Retail sales expanded by 0.8% in November, beating expectations, as consumer spending rebounded. The report cited strength in ecommerce sales ahead of the holiday season, as well as gains in restaurants and apparel.
- Job openings (a measure of labor demand) remained at a historically strong level in October despite falling from 6.12 to 6.00 million, according to the Department of Labor’s Job Openings and Labor Turnover Survey. Hires climbed by 232,000 to 5.55 million, but continued to lag the number of available jobs; employers still struggled to find qualified staff at competitive wages.
- Initial jobless claims fell by 11,000 to 225,000 in the week ending December 9, the fourth straight weekly decline. The more-stable four-week moving average fell by 6,750 to 234,750. Continuing claims fell by 27,000 to 1.89 million in the week ending December 2. Economists expect the historically tight labor market to eventually boost wage growth as companies pursue skilled workers.
- The European Central Bank (ECB) left interest rates unchanged in December and reaffirmed that its asset-purchase program would be reduced in January to €30 billion per month through at least September 2018 (and longer, if necessary). ECB President Mario Draghi emphasized the need for rates to remain steady in the near term as inflation undershoots the central bank’s target.
- The Bank of England left interest rates at 0.50% in a unanimous vote by the members of the rate-setting Monetary Policy Committee. The central bank also maintained its asset-purchase program, upholding its conservative stance until the economic outlook stabilizes.
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