This week’s highly anticipated Fed meeting yielded another no change decision. The Fed decided it was still not the right time to raise its policy rate for the first time since 2006 because of increased concern about the economic outlook. Recent survey indicators show that such concerns are warranted.
Every month, the first indications of business confidence in the US are provided by the regional ISM-indicators for New York (Empire state) and Philadelphia. These have a decent, albeit far from perfect, track record to indicate where overall business confidence in the US is heading in the near term. Both these indicators came in quite weak in September. On top of that, the first indication for consumer confidence in September also showed the lowest number of the past 12 months.
Confidence indicators can be quite fickle, and there are numerous other indicators that still suggest a continuing gradual economic recovery. Still, these weaker numbers are enough to raise valid concerns about the near-term strength of the US economy. In that light, the decision by the Fed to wait for some more confirmation on the recovery was the right one.