Good day. The Federal Reserve lifted interest rates for the fifth time this year, and signaled the increases could keep coming as the central bank tries to rein in inflation. The latest move puts the federal-funds rate target at 3% to 3.25%, and projections from Fed officials suggest it could end the year in a range between 4.25% and 4.5%. Meanwhile, in Brazil, the central bank left its benchmark rate unchanged yesterday after a series of increases stretching back to early 2021. However, the Bank of England this morning raised its key interest rate for the seventh consecutive time, but held off from quickening the pace of its rate hikes as government measures to cap soaring energy bills promised to ease inflation in the months ahead. And in Japan, the government intervened in the foreign exchange market by buying yen for the first time in 24 years, shortly after the Bank of Japan accelerated a fall in the currency by confirming it would keep ultra-low interest rates.

Now on to today’s news and analysis.

The Federal Reserve approved its third consecutive interest-rate rise of 0.75 percentage point and signaled additional large increases were likely at coming meetings. The decision Wednesday was unanimously supported by the Fed’s 12-member rate-setting committee. “We have both the tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses,” Chairman Jerome Powell said at a news conference after the Fed's policy meeting.

• Transcript: Jerome Powell’s Postmeeting Press Conference
• How the Fed's September Statement Changed
• How the Rate Increase Will Hit Americans’ Monthly Budgets
• Markets Brace for Hard Landing as Fed Delivers Sobering Message

Facing questions from House lawmakers on Wednesday, bank chief executives, including JPMorgan Chase’s Jamie Dimon and Citigroup’s Jane Fraser, offered a favorable picture of an industry they say helped the economy recover from a pandemic-induced recession, while showing uncertainty about the future.

Federal Reserve leader Jerome Powell has warned for some time that the central bank’s effort to bring inflation back toward more manageable levels will bring some pain to the economy. That price is now starting to come into focus.

The Fed met expectations Wednesday and lifted its overnight target rate range by 0.75 percentage point to between 3% and 3.25%. It also said that over time it will likely raise rates by more than it did in its official June forecast, and it now sees the federal funds target rate peaking next year at 4.6% before falling in 2024 and beyond. Read more. 

U.S. existing-home sales and prices fell in August from the prior month as mortgage rates climbed toward their highest level in 14 years. Sales of previously owned homes dropped 0.4% in August from July to a seasonally adjusted annual rate of 4.8 million, the weakest rate since May 2020, the National Association of Realtors said Wednesday. August sales fell 19.9% from a year earlier.

• After Years of Low Mortgage Rates, Home Sellers Are Scarce

An advisory panel to the Securities and Exchange Commission said the regulator should tighten its oversight of the body that sets accounting rules for companies and nonprofits in the U.S. amid concerns from investors about its independence and priorities.

Tether Holdings the issuer of the world’s largest stablecoin, will need to produce balance sheets, income statements, cash-flow statements and profit-and-loss statements under the order. It also will have to provide documents to establish sufficient reserves for its stablecoin, tether, including account statements for all its banks.

8:30 a.m.: U.S. weekly jobless claims
12:30 p.m.: ECB's Schnabel speaks in Luxemburg

2 p.m.: Fed’s Powell, Brainard and Bowman speak at Fed Listens event on transitioning to postpandemic economy

Fed chief Jerome Powell described the labor market as “extremely tight” and “out of balance,” with demand for workers outstripping supply, Aaron Back of WSJ writes. This isn’t the 1980s, and the inflation Mr. Powell is contending with isn’t nearly as entrenched as that of the 1970s. A recession therefore isn’t a sure thing and, if there is one, it might not be very deep or prolonged by historical standards. But it is quite clear that the Fed still wants to see the economy slow significantly from where it is now, even if that involves some pain for American companies and households.

Workers’ attitudes, and leverage, have shifted in important ways in recent years, WSJ's Greg Ip writes. The effect is to make labor scarcer and more expensive than ordinary economic indicators show. Of course, attitudes toward work have steadily evolved over the past century, reflecting changing social attitudes, such as toward child labor, whether mothers should stay home, and whether employers should offer overtime pay, healthcare or other benefits. Sometimes, though, a single event catalyzes change. World War II spurred a big boost to women’s labor-force participation. President Ronald Reagan’s firing of striking air-traffic controllers in 1981 dealt a lasting blow to unions’ bargaining power. The Covid-19 pandemic might, similarly, have catalyzed a reappraisal of what workers are willing to do, for how many hours, and at what wage. While this mostly consists of anecdotal evidence of a “great resignation” or “quiet quitting,” some empirical evidence points in the same direction.

• U.S. commercial oil inventories rose less than expected last week as refinery activity saw an unseasonably sharp increase in activity, according to data released by the Energy Information Administration. Crude-oil stockpiles climbed by 1.1 million barrels, to 430.8 million barrels, and are still about 2% below the five-year average, the EIA said. (Dow Jones Newswires)
• Some highly rated companies are turning to term loans instead of bonds for their financing needs, taking advantage of cheaper pricing as banks adjust more slowly to rising interest rates than the credit markets.
• Indonesia's central bank raised its benchmark interest rate for a second consecutive month Thursday, as part of efforts to rein in rising inflation in the world's fourth-most populous nation.
• The Philippine central bank raised its benchmark interest rate in a bid to tame persistently high inflation. The Bangko Sentral ng Pilipinas said it would increase its benchmark overnight borrowing rate by 50 basis points to 4.25%, effective Friday, and its corresponding lending rate by the same amount to 4.75%. (DJN)
• Taiwan's central bank on Thursday raised its benchmark rate for the third consecutive quarter after increasing rates in March for the first time in two years. (DJN)
• Norway's central bank raised its key policy rate to 2.25% from 1.75%, and said it will most likely raise the rate further in November. Analysts polled by The Wall Street Journal had expected the central bank to raise its key rate to 2.25%. (DJN)
• Switzerland's National Bank raised interest rates for the second time in as many meetings, catching up with other central banks as the country faces the highest inflation rate in three decades. (DJN)
• The Turkish central bank on Thursday made a surprising move as it reduced its benchmark rate to 12% from 13%, even as inflation rose again last month. The bank was largely expected to keep its policy stance unchanged. (DJN)
• Sentiment in the French manufacturing sector declined in September for the third consecutive month amid increasing energy prices and weakening demand. (DJN)

This newsletter was compiled by Michael Maloney in New York and Perry Cleveland-Peck in Barcelona.

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