Sustaining Resilience in an Evolving Economic Landscape
With the current economic outlook, resilience stands as a defining trait amidst challenges, with indicators pointing towards solid expansion. Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong, and the unemployment rate has remained low. Inflation remains elevated.
Monetary Policy and the Economic Outlook
The Federal Reserve aims for maximum employment and a 2 percent inflation rate in the long run. The target federal funds rate range remains at 5-1/4 to 5-1/2 percent. The Committee will closely assess incoming information and its implications for monetary policy. The Committee will consider the cumulative effects of prior policy tightening, the lag in monetary policy impact, and economic and financial developments when deciding on further policy adjustments.
Policy Implementation and the Economic Outlook
The Board of Governors voted unanimously to maintain the interest rate paid on reserve balances at 5.4 percent. Open Market Desk will conduct transactions in line with specified policy directives. The Board approved maintaining the primary credit rate at 5.5 percent.
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Consumer Price Index
The Consumer Price Index for All Urban Consumers (CPI-U) rose by 0.4 percent in September, following a 0.6 percent increase in August. Over the past 12 months, the all items index saw a 3.7 percent increase. The index for shelter and gasoline were primary drivers of the monthly increase. The energy index rose 1.5 percent, while the food index increased 0.2 percent.
Core Inflation
The index for all items excluding food and energy also rose by 0.3 percent in September, mirroring August’s increase. Notable increases were observed in rent, owners’ equivalent rent, lodging away from home, motor vehicle insurance, recreation, personal care, and new vehicles. Conversely, the indexes for used cars and trucks, and apparel decreased.
UK GDP and the Economic Outlook
Monthly real gross domestic product (GDP) grew by 0.2% in August 2023, following a 0.6% contraction in July. Over the three months leading up to August, GDP increased by 0.3%. Services output, a significant contributor to GDP, rose by 0.4% in August. However, consumer-facing services saw a 0.6% decline. Production output and the construction sector both experienced contractions, falling by 0.7% and 0.5% respectively.
Revisions and Long-term Growth in the Economic Outlook
This release incorporates revisions to data from January 1997 to June 2023. Looking at the broader picture, GDP showed 0.3% growth in the three months to August 2023 compared to the three months to May 2023. The production sector was the main driver, growing by 1.2%. While some sectors experienced contractions, the overall GDP showed signs of recovery in August 2023, indicating resilience in the UK economy.
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