Investors, The stock market was shaken last week by an unstable extension of trading, This week turned their attention to the September meeting of the Federal Open Market Committee (FOMC) with two key reports on the state of the US consumer.
The upcoming meeting of the FOMC on Tuesday and Wednesday is a few weeks following the central bank Annual Economic Policy Symposium, During which officials announced a new framework to express their thinking on rate fixing in light of inflation. The updated framework will allow them to moderate their 2% inflation target, which will alleviate the urgency for officials to step in to prevent the growth of inflation.
Announcing the decision, however, Federal Reserve Chairman Jerome Powell left the panel to discuss tactics at upcoming meetings, avoiding details on how the FOMC will achieve higher average inflation several years after lowering its target. Many economists expect the mechanisms for implementing the central bank’s new structure to be elusive at the September meeting.
“We do not expect major policy findings at the September FOMC meeting,” Nomura economist Louis Alexander wrote in a note. “Recent feedback from FOMC participants suggests a strong, consensus view for outcome-based forward guidance or in some respects significant changes in property purchases.”
That is, participants have not yet agreed on when specific forward guidance should be provided, Alexander pointed out. In a recent recent comment, Federal Gov. Lyle Brainard said the policies could be implemented “In the coming months,” And Charles Evans, chairman of the Central Bank of Chicago “Beneficial in the not-too-distant future.” Others, however, point to a less stressful deadline, suggesting that Loretta Master of the Federal Reserve Bank of Cleveland should not be one “Immediate need” For this move, too, he did not tell the Federal Reserve Bank of Atlanta Rafael Postick the Wall Street Journal “I think we are now.”
As the central bank’s revised economic plan summary – or “dot plot” – is scheduled to be released this week, FOMC officials’ unique views on the way forward for central and long-term interest rates will come as a sharp relief. Well. Officials have so far telegraphed, which is the federal funding rate Zero is tied to the 2022 forecast horizon, The updated print is set to cover the views of officials by 2023.
In an NPR interview earlier this month, Powell pointed out that keeping the rates of a slow viral economic recovery and even more gentle inflation trends in the zero range would be “measured in years”.
“As a result, we expect the average point to be zero in 2023,” UPS economist Seth Carpenter said in a note. “Of course, there will be others who are more optimistic and optimistic in 2022 and 2023, but not the average, not the central bank leadership. The economic outlook that demands such a position will not change much from the June forecasts.”
“The surprising decline in the unemployment rate in August will be discounted by some, and we suspect it will be the last expansion. 3.5% unemployment rate with inflation below target This means that any expectation of inflation will be gradual, ”Carpenter added.
Meanwhile, Powell’s press conference on Wednesday afternoon following the conclusion of the Monetary Policy Meeting is expected to include comments that will give a warning tone on the pace of the economic recovery amid the current epidemics, despite the newly released economic data moves. In a somewhat positive direction.
“The risk of another corona virus outbreak as the flu season approaches remains a late-recurring risk theme,” economists at RBC Capital Markets wrote in a note on Friday. “In the end, there is no reversal for the team to be positive at this point. They will continue to be vigilant and no one will worry if something goes wrong. If they turn positive and go wrong, it could be a disaster for credibility.”
“We expect a good portion of the Q&A edition during the press conference to focus on recent changes in monetary policy structure,” they added. “Most of the Powell touches at Jackson Hole were very forward-looking, so 1) higher preference to drive inflation above 2% (average rules of inflation) and 2) higher unemployment rate than the natural rate of the future (combining Powell-inspired employment and inflation). Recent changes from our lens already Only the integration of the active process. ”
Retail, consumer consciousness
In the forefront of economic data, the August retail report released on Wednesday will draw considerable attention, providing an updated view of the state of consumption at the end of the summer.
The pace of monthly retail profits fell sharply from a record high of 18.2% in May. Michael Pierce, a senior U.S. economist in the capital economy, said in a statement on Friday that retail sales were up 1.2% in July, higher than pre-epidemic levels, which “now leaves very little opportunity for rapid monthly gains”.
Consensus economists expect retail sales to rise more than 1.0% in August, following a 1.2% gain in July. This marks the fourth consecutive month of monthly retail sales.
“Some sectors continue to struggle, and as the number of new virus cases decreases, there is a possibility of a strong increase in spending on bars and restaurants in August following the renewal of regulations,” Pierce added. “Clothing sales may continue to pick up, but construction materials continued to be easy after their previous rise, while other types saw more modest gains.”
A separate report released on Friday will reflect the position of consumers through a different lens. The University of Michigan is set to release its meticulously monitored consumer survey, which is expected to raise consumer sentiment somewhat to an index level of 75.0 in early September. From 74.1 in August. The index has been in a captive form since it was 71.8 during the epidemic in April, as consumers continue to cite concerns about the epidemic and the economic woes that have followed.
Monday: ந / அ
Tuesday: Empire production, September (6.0 expected, August 3.7); Import price index, first month of August (0.5% expected, 0.7% in September); Export price index, first month of August (0.4% expected, 0.8% in July); Industrial production, first month of August (1.0% expected, 3.0% in July); Efficiency utilization, August (71.5% expected, July 70.6%)
Wednesday: MBA mortgage applications, the week ending September 11 (2.9% previous week); Retail sales are up monthly (1.0% expected in August, up from 1.2% in July); Retail sales, excluding autos and gas, were up from a month earlier in August (expected 0.9%, to 1.5% in July); Commodity inventory, July (0.2% expected, -1.1% in July); NAHB Housing Market Index, September (78 expected, August 78); FOMC rate decision; Net long-term TIC flows, July (3 113.0 billion in June); Total Net TIC Flows, July (-. 67.9 billion)
Thursday: Building permits, August (1.52 million expected, 1.483 million in July); Housing starts, August (1.475 million expected, 1.496 million in July); Philadelphia Fed Business Outlook Index, September (15.0 expected, August 17.2); Initial unemployment claims, the week ending September 12 (expected 850,000, 884,000 the previous week); Continued claims, week ended September 5 (expected 13.000 million, previous week 13.385 million)
Friday: Current account balance, second-quarter (expected $ 160.0 billion, previous week 2 $ 104.2 billion); Leading index, August (1.3% expected, 1.4% in July); University of Michigan Sentiment, September Preliminary (75.0 expected, 74.1 in August)
Monday: Lenar (Len) After the market closes
Wednesday: ந / அ
Thursday: ந / அ
Friday: ந / அ
Emily McCormick is a reporter for Yahoo Accounting. Follow her on Twitter: emily_mcck
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