It seems as if every time the Federal Reserve sits down and considers an interest-rate hike, something makes the central bank question the strength of the economy and rethink the idea.
Minutes from the September meeting of the Federal Open Market Committee show the regulators remain concerned about growth risks, most of them coming from China, so they held their fire once again.
Economy watchers have been expecting a rate increase for months, particularly because Fed chairman Janet Yellen and other central bank officials have consistently said they are prepared to take that step.
“They still think everything is on track,” Moody's Analytics chief economist Mark Zandi told the New York Times, “but they want to make absolutely sure, given how poorly things are going overseas and how strong the dollar is.”
Since the September meeting the economy’s signals have, if anything, been more unclear than before. The Labor Department delivered a disappointing September report: Only 142,000 new jobs were created, there was a drop in the labor force participation rate and hourly wages remained stagnant.
Last week the Fed reported that consumer credit rose by $16 billion in August, but that was significantly below an $18.9 billion increase in July. The new number also fell short of the $20.5 billion gain economists expected.
New applications for jobless benefits fell by 13,000, to a seasonally adjusted 263,000, for the week that ended Oct. 3 — the lowest number since mid-July, when the number of claims was at its lowest since 1973.
Reuters said the low jobless-claims total is remarkable because the U.S. workforce has grown considerably since the 1970s. It also marked the 31st week in a row that claims remained below 300,000, which usually signifies a strengthening labor market.
This week brings September reports on retail sales (economists expect a gain of 0.1 percent, down from 0.2 percent in August) and the Consumer Price Index (economists expect a drop of 0.3 percent, compared with a decline of 0.1 percent in August).
Preliminary October results for the University of Michigan’s Consumer Sentiment Index will be released on Friday, and economists expect the index to edge up to 88.1 from the previous 87.2.
New York Federal Reserve president William Dudley said Friday in an interview with CNBC that a rate hike at the Fed’s Oct. 27-28 meeting remains possible.
Even if the Fed delays action again, Dudley predicts a rate increase this year, "but it's a forecast and we're going to get a lot of data between now and December, so it's not a commitment."
He addressed the shifting winds that forecasters continue to see.
"It's a mixed picture, the domestic side of the economy looks really good, some temporary drag from inventories and some more persistent drag from the trade sector," he said.