The 2.6% annualised rise in third quarter GDP was a lot worse than it looked, with growth in underlying demand grinding to a near-halt. At the same time, there are mounting signs that economic weakness will soon feed through to disinflation in core services. While that won’t be enough to stop the Fed raising rates by 75bp next week, we suspect officials will have seen enough to lay the groundwork for a step down in the pace of hikes.
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