The Fed Wants To Cool Spending; A Strike, A Shutdown And Student Loans May Add Ice  

• U.S. Federal Reserve officials, who have tentatively embraced the possibility they can squelch inflation without a recession, meet this week with an autoworkers strike, a possible federal government shutdown, and a student loan squeeze on consumers posing new risks to that best-case outcome.
• The United Auto Workers launched a strike against all three major automakers on Friday with an initial walkout of around 13,000 employees at three plants, but those numbers could grow. Federal elected officials have only until Sept. 30, when current spending authorizations expire, to come up with a deal or federal agencies will have to shutter, and congressional Republicans have stymied negotiations.
• With the economy already expected to slow over the final months of the year, prolonged disruptions in the auto industry and at federal agencies could have unpredictable results: Sapping consumer spending, possibly pushing up car prices in a blow to the Fed's inflation fight, and producing the sort of knock to business and consumer confidence that could spell the difference between a "soft landing" and a downturn.
• With millions of consumers also facing the renewal of student loan payments in October that will divert from other spending, Goldman Sachs economists have tempered their generally bullish outlook with warnings of a fourth-quarter "pothole" that could knock more than a percentage point from gross domestic product growth.
• Over recent months’ economic data has generally worked in the Fed's favour, with inflation ebbing even as the economy continues to grow above trend and add a healthy number of jobs each month. However, shutdowns of two major sectors - with potentially as many as 146,000 auto workers striking and perhaps 800,000 federal employees without paychecks - will chip away at growth and confidence every week they continue.

(Source: Reuters)