US Federal Reserve raises interest rates by 75 basis points, signals more rate hikes. The US Fed on Wednesday delivered its third consecutive interest rate rise of 0.75 of a percentage point indicating further large increases were likely in the next months in its fight against inflation which persists near a 40-year high. In its efforts to curb inflation, the central bank raised its key interest rate to a range of three percent to 3.25 percent, the highest it has been since early 2008. Higher US interest rates attract global investments due to attractive interest rate differentials and drive up the value of the American dollar. This boosts the US dollar, whilst weakening the currencies of other economies — making everything from debt repayment to imports more expensive for them.
UK manufacturers gloomy about near-term outlook – CBI. A monthly survey by the Confederation of British Industry (CBI) showed on Wednesday that UK manufacturers expect the biggest decrease in production since the start of 2021, over the next three months. A net four percent of respondents said their output fell in the three months to September, compared to minus seven percent in August. Moreover, output is expected to fall at an increased rate in the next three months with the number falling to -17 percent. "It is clear that the downturn, which originated in consumer-facing services, has spread to manufacturing," CBI deputy chief economist Anna Leach said.
US existing home sales decline in August. Sales of previously owned homes in the US fell in August, being the latest sign of how high borrowing costs and faltering demand are causing the housing market to weaken further. In August, existing home sales inched down by 0.4 percent to a seasonally adjusted annual rate of 4.8 million, the lowest level seen since May of 2020 and following a downwardly revised 5.7 percent in July. The August figure marks the seventh consecutive month of falls in existing home sales. The figure was in line with market forecasts of 4.7 million. This decline in home sales is creating ripple effects through the US economy as consumers spend less on housing-related items such as furniture and appliances. In the meantime, construction of new single-family homes also experienced a slowdown.
China holds it benchmark lending rates unchanged. The People's Bank of China (PBOC) kept steady its key rates for corporate and household loans, as widely expected, amid a rapid decline in the value of the currency, the yuan. The one-year loan prime rate was maintained at 3.65 percent and the five-year rate, that is closely tied to home mortgages, stands at 4.3 percent. China cut both these rates last month. Despite the weakness in the currency, markets widely expect policymakers to take further steps to loosen monetary policy as the economy struggles to achieve the government’s growth target of around 5.5 percent this year.
Australia leading index plunges. Australia's economic growth is likely to weaken amid rising interest rates, declining commodity prices and a weakening labour market, Westpac said on Wednesday. The six-month annualised growth rate in the Westpac-Melbourne Institute Leading Index, which attempts to predict the likely strength of economic activity relative to trend three to nine months ahead, dropped to -0.36 percent in August, down from +0.49% in July. This is the first time that the index fell into negative territory since the start of the year and the weakest since the Covid-19 delta variant lockdown in 2021. Westpac chief economist Bill Evans said the index was pointing to a material loss in economic momentum, tipping the economy to expand by 0.6 per cent in the December quarter after 1.1 per cent in the September quarter.