Despite the darkening global backdrop, the continued strength of the US economy will be enough for the Fed to raise interest rates as planned in December. Fed officials have acknowledged the weakness of the incoming economic data from overseas, including outright declines in third quarter GDP in Germany and Japan, and the continued slowdown in China. Together with the stronger dollar, weaker global demand will weigh on the manufacturing sector over the coming months. But domestic demand growth remains strong and the latest plunge in global oil prices should be a net positive. The labour market is still firing on all cylinders and core inflation is at the 2% target so, barring a complete meltdown in equity markets, we expect the Fed to press ahead with its gradual rate hikes.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services