U.S. housing sector data supports expectations for November Fed rate cut
On Friday, US housing sector statistics showed gloomy signs. The number of building permits fell sharply in September, and the number of housing starts also fell, suggesting weak demand. Weak demand could impact home prices, consumer confidence, and the overall U.S. economy. Declining consumer confidence could cause consumer spending, which accounts for more than 60% of the US GDP, to stagnate.
Weak housing sector data confirmed investors’ bets on a Nov. 25 Fed rate cut and boosted demand for riskier assets. The probability that the Fed will cut rates by 25 basis points in November rose from 90.4% to 92.6% on Oct. 18, according to the CME FedWatch tool.
People’s Bank of China lowers loan prime rate
On Monday, October 21, the People’s Bank of China (PBOC) lowered the one-year and five-year loan prime rates (LPR) by 25 basis points to 3.10% and 3.60%, respectively. Economists had expected the central bank to cut the LPR by 20 basis points.
Interest rate cuts could lower consumer borrowing costs, including interest rates on consumer loans, mortgages, and credit cards, and increase disposable income. Lower borrowing costs and higher disposable income could lead to more consumer borrowing and spending.
The central bank has lowered the prime loan interest rate for the third time this year.
