sufficiently restrictive over the longer term to get inflation under control. This could elevate the Unemployment Rate, slow labor demand, and make factory activities more vulnerable. This week investors will focus on US Durable Goods Orders data and the Fed’s preferred inflation gauge for August.Gold price juggles around $1,920, stays inside Friday’s range, as uncertainty grows over the interest rate outlook by the Federal Reserve.
S&P Global reported on Friday that a preliminary Manufacturing PMI for September improved to 48.9 from expectations of 48.0 and August’s reading of 47.9. Services PMI, which tracks a sector that accounts for two-thirds of the US economy, dropped to 50.2 from the estimates of 50.6 and the 50.5 figure in August.
Boston Fed President Susan Collins remains confident about further policy tightening. Collins said on Friday that a further rate hike is certainly not off the table. She further added that inflation can fall with only a modest rise in unemployment and that core services excluding shelter have not yet shown a sustained improvement.
Meanwhile, US equities are under pressure as investors expect a “higher for longer” context for interest rates would dent overall demand. This may force US firms to trim their growth projections. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar as it makes the US a more attractive place for international investors to park their money.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.