WASHINGTON - Throughout its two-year battle with inflation, the Federal Reserve has tried to squeeze consumers hard enough through higher interest rates that they stop spending, bring demand in line with supply, and drive U.S. economic growth below its potential to ease price pressures.With financial markets expecting the U.S.
But recent weeks have provided little clarity on when that might happen, with long-awaited turns lower in hiring, housing inflation, services spending and other key data points postponed by an economy that won't quit. Investors consider it a near certainty that the central bank will keep its benchmark overnight interest rate in the 5.25%-5.50% range that was set at its meeting in July, with the odds also weighted against any further increases moving forward.
Gross domestic product growth for the third quarter best exemplified the risks the Fed is trying to parse, with pandemic-era savings, combined with a low unemployment rate and ongoing healthy wage increases, allowing consumers to keep fueling strong economic growth. That countered concerns that developments like renewed student loan payments and weakened consumer confidence would cause people to pull back.
"Consumers continued to be preoccupied with rising prices in general, and for grocery and gasoline prices in particular," Dana Peterson, the Conference Board's chief economist, said on Tuesday after the business group reported that its consumer expectations index for October remained below a level that has typically signaled a coming recession."Consumers also expressed concerns about the political situation and higher interest rates.
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