Another Rate Bump: March 20 – 24

The Federal Reserve bumps up short-term interest rates again while stating that the banking system is sound. Here are the five things we learned from U.S. economic data released during the week ending March 24.


Even after SVB, the Federal Reserve raised short-term interest rates. The policy statement released following this past week’s Federal Open Market Committee (FOMC) noted that job creation was “running at a robust pace,” spending and production were seeing “modest growth,” and inflation “remains elevated.” And as a coy reference to troubles at certain banks, the statement stressed that “[t]he U.S. banking system is sound and resilient.” But the SVB, Signature Bank and other troubles also “were likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation.” And yet, at the same time, it stressed that the Fed is “strongly committed” to bringing inflation back to its two-percent target. As a result, the FOMC voted unanimously to bump up the fed funds target rate by 25 basis points to a range between 4.75 and 5.00 percent and continue shrinking the central bank’s holdings of Treasury and mortgage-backed securities. 

The U.S. economy grew at a slower pace in February. The Chicago Fed National Activity Index (CFNAI) shed 42 basis points to a reading of -0.19. A CFNAI reading between -0.70 and 0.00 indicates an economy growing slower than its historical average. Only 38 of the economic indicators that make up the CFNAI made positive contributions to the index. The other 47 measures pulled down the index. All four major categories of index components were drags on the CFNAI: personal consumption/housing (costing the index eight basis points), production (-0.08), sales/orders/inventories (-0.02), and employment (-0.02). While the CFNAI’s three-month moving average of -0.13 was a 14-basis point improvement from January, the measure has been in negative territory since last November.

Existing home sales broke their 12-month losing streak in February. The National Association of Realtors reports existing home sales surged 14.5 percent to a seasonally adjusted annualized rate (SAAR) of 4.580 million units. Even with the gain, sales remained 22.6 percent below year-ago levels. Sales improved in all four Census regions, from a 4.0 percent increase in the Northeast to a 19.4 percent surge in the West. Inventories, nevertheless, continued to be tight as they held steady at 980,000 homes (the equivalent of a 2.6-month supply). The median sales price of $363,000 was 0.3 percent below its February 2022 mark. The press release links the positive report to a recent pullback in interest rates.

New home sales improved for only the second time in seven months in February. Sales of new single-family homes grew 1.1 percent to a seasonally adjusted annualized rate (SAAR) of 640,000 units. The Census Bureau data series remained 19.0 percent below year-ago levels. Sales improved in the West and South but declined in the Northeast and Midwest. There were 436,000 new homes available for sale at the end of February, off 0.7 percent from the prior month and the equivalent of an 8.2-month supply. The median sales price for new homes ($438,200) was up 2.5 percent from a year earlier. 

Another slowdown for airplanes and automobiles pulled down durable goods orders in February. New orders for durable manufactured dropped 1.0 percent to a seasonally adjusted $268.4 billion. The Census Bureau data series had slumped 5.0 percent in January. Transportation goods orders decreased 2.8 percent, with declines for defense aircraft (-11.1 percent), civilian aircraft (-6.6 percent), and motor vehicles (-0.9 percent). Net of transportation, core durable goods orders were flat in February, following a 0.4 percent bump during the previous month. Orders edged up for primary and fabricated metals, along with electrical equipment/appliances, but declined for machinery, computers, and communications equipment. Shipments fell 0.6 percent in February to $274.8 billion, bigger than January’s 0.4 percent drop.

Other U.S. economic data released over the past week:

  • Jobless Claims (Week ending March 18, 2023, First-Time Claims, seasonally adjusted): 191,000, -1,000 vs. the previous week, +25,000 vs. the same week a year earlier). 4-week moving average: 196,250 (+8.6% vs. the same week a year earlier). 
  • State Employment (February 2023, Nonfarm Payrolls, seasonally adjusted): Increased in 6 states and unchanged in 44 states and the District of Columbia vs. January 2023. Increased in 46 states and unchanged in 4 states and the District of Columbia vs. February 2022. 

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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