Today’s updates on US economic activity—housing starts and jobless claims–offer a fresh round of encouragement for expecting moderate growth in the near term. The numbers are a net positive for monetary hawks who argue that the Federal Reserve should announce a rate hike today.  The counterpoint is that economic growth has been sluggish lately, raising concerns that it’s still too early to start tightening policy. Nonetheless, the data du jour provide some support for the view that the US economy is still on a path of moderate growth.
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The Federal Reserve may or may not raise interest rates today—the mystery will be solved when today’s policy announcement hits the streets at 2:00 pm eastern. Meanwhile, what’s the case for squeezing liquidity, if only slightly? US economic growth, after all, has been sluggish lately, which inspires Goldman Sachs CEO Lloyd Blankfein (among others) to recommend that the central bank delay the first hike in over a decade. The economic data “is not compelling to raise interest rates right now,” he says. An open-and-shut case? Not quite, which explains the recent obsession with analyzing/forecasting the Fed’s decision that’s finally upon us. So, how might the monetary mavens rationalize raising rates today? By focusing on the specific data points that support a hike. Although Blankfein suggests otherwise, there are some indicators that suggest that tighter policy is appropriate. To be precise, certain models are a hawk’s best friend for arguing that it’s time to pull the trigger.
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● Key issues to monitor for today’s Fed announcement | LA Times
● Goldman Sachs chief says data doesn’t support Fed rate hike | Telegraph
● Weaker export growth for Japan in August | MarketWatch
● No change in interest rates for Swiss central bank | Reuters