Powell: Higher interest rates are unlikely to cause a deep US recession
WASHINGTON — The last time the Federal Reserve faced inflation as high as it is today was in the early 1980s, when it hiked interest rates into double digits — causing a deep recession and soaring unemployment in the process. On Thursday, Chairman Jerome Powell hinted that the Fed doesn’t need to go nearly as far this time. “We believe we can avoid the very high social cost that Paul Volcker and the Fed had to bring into play to bring inflation back down,” Powell said in an interview at the Cato Institute, referring to the Fed Chair , which in the early 1980s sent short-term lending rates to about 19% to curb punishingly high inflation.
Stocks recover from a stumble on Wall Street and end higher
NEW YORK — The stock market rebounded from a midday stumble and closed higher, remaining on course for its first weekly gain in four weeks. The S&P 500 rose 0.7% on Thursday. The Nasdaq Composite and Dow Jones Industrial Average also closed higher after their own bumpy rides. Interest rate policy took center stage as the European Central Bank made its largest-ever rate hike, in line with measures taken by the US Federal Reserve and other central banks to combat inflation. Meanwhile, Fed Chair Jerome Powell reiterated the Fed’s commitment to keeping rates high “until the job is done” to bring inflation under control.
Yellen is pushing Biden’s economic plans on the Michigan battlefield
WASHINGTON — Treasury Secretary Janet Yellen has advocated democratic economic policies during a visit to Ford’s Rouge electric vehicle assembly plant on Michigan’s election-year battlefield. After a production tour, Yellen promoted the recent legislative wins of the Biden administration. Yellen is more optimistic about the economic trend than “for a long time” and knows “that we are on the right track”. Yellen’s visit to Detroit was part of a month-long tour and a larger White House campaign to highlight new legislation designed to support the economy, boost computer chip production, lower prescription drug prices, expand clean energy and renew the country’s infrastructure .
Fewer Americans filed for unemployment benefits last week
WASHINGTON – The number of Americans filing for unemployment benefits last week fell to its lowest level since May, despite repeated attempts by the Federal Reserve to cool the economy and bring inflation under control. Jobless claims for the week ended Sept. 3 fell 6,000 to 222,000, the Labor Department reported Thursday. Initial applications usually reflect layoffs. The four-week average for claims, which smoothes out some of the weekly highs and lows, fell 7,500 to 233,000. US hiring numbers in 2022 have been remarkably high even as the country faces rising interest rates and weak economic growth.
Long-term mortgage rates are now at their highest since 2008
WASHINGTON – Average U.S. long-term mortgage rates rose again this week to the highest level in almost 14 years, which is sure to keep even more potential buyers away from a housing market that has cooled significantly since the Federal Reserve began raising its benchmark interest rate to increase. Mortgage buyer Freddie Mac reported Thursday that 30-year rates rose to 5.89%, the highest since November 2008, shortly after the housing market meltdown sparked the Great Recession. The average interest rate on 15-year fixed-rate mortgages, popular with people looking to refinance their homes, rose above 5% for the first time since 2009.
Great Britain wants to cap energy prices, end fracking ban to defuse crisis
LONDON – British Prime Minister Liz Truss says her Conservative government will cap domestic energy prices for homes and businesses to ease the cost of living crisis. She also says she will authorize more oil drilling in the North Sea and lift a ban on fracking to increase the UK’s domestic energy supply. Truss told lawmakers on Thursday that the two-year “energy price guarantee” means average household bills for heating and electricity will not exceed £2,500 a year. Bills were set to rise to £3,500 a year from October, triple the cost of a year ago. Critics say it means taxpayers have to foot the bill, rather than energy companies reaping windfall profits.
As the housing market cools, homebuyers regain leverage
LOS ANGELES — Homebuyers are regaining influence at the negotiating table as the housing market slows, new data from Redfin shows. On average, US homes bought during a four-week period in August sold for less than asking price. According to the real estate agent, this has not happened since at least March 2021. Years of soaring home prices and soaring mortgage rates remain hurdles for many would-be homebuyers, but as more homes sell for less than their asking price, the housing market is at least becoming less skewed in favor of sellers.
Cheaper electric vehicles are coming despite high battery costs
WARREN, Mich. – Auto companies are rolling out more affordable electric vehicles that should broaden their appeal to a larger group of buyers. And that despite rising battery costs. The latest electric vehicle arrived Thursday from General Motors, a Chevrolet Equinox small SUV. It has a starting price of around $30,000 and a range per charge of 250 miles or 400 kilometers. You can get 300 miles or 500 kilometers of range if you pay more. GM won’t release the exact price of the Equinox EV until closer to the date it goes on sale, around this time next year. But the SUV sits at the bottom of Edmunds.com’s price list for electric vehicles sold in the US. The average cost of an electric vehicle is currently around $65,000.
The European Central Bank carries out the largest rate hike of all time
FRANKFURT, Germany – The European Central Bank has made its biggest rate hike yet to fight record inflation that is squeezing consumers and pushing the 19 countries that use the euro currency into recession. The bank’s 25-member board of directors raised its key benchmarks by an unprecedented three-quarters of a percentage point on Thursday. The ECB joined the US Federal Reserve and other central banks in the global panic of rapid rate hikes. Russia’s war in Ukraine has fueled inflation in Europe, with Russia sharply reducing supplies of cheap natural gas used to heat homes, generate electricity and run factories. This has pushed gas prices up tenfold or more.
The S&P 500 rose 26.31 points, or 0.7%, to 4,006.18. The Dow Jones Industrial Average rose 193.24 points, or 0.6%, to 31,774.52. The Nasdaq rose 70.23 points, or 0.6%, to 11,862.13. The Russell 2000 index of smaller companies rose 14.90 points, or 0.8%, to 1,846.91.
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