Heads up, Fed watchers (aren't we all Fed watchers at this point?). This week is going to be an important one to anyone wondering how much more the central bank might raise interest rates. We have a slew of important economic data being released this week that could impact the Fed's decisions going forward.
On Thursday, we'll get the latest inflation figures when the Personal Consumption Expenditures (PCE) Price Index is released. I know you might be thinking: "Inflation? Again? Didn't we just get those numbers?" The Consumer Price Index (CPI) came out earlier this month. It's based on data from surveys of urban households.
But the PCE uses information from the gross domestic product report and from suppliers, and measures purchases from all U.S. households. It's actually the Fed's preferred gauge of how fast prices are rising, so it's an index we'll want to watch. Inflation is expected to tick downward, but only slightly, indicating that the Fed still has more work to do.
A day later, we'll get a snapshot of the jobs market when the Labor Department's November jobs report is released. With many companies announcing layoffs and jobless claims (the number of people filing for unemployment for the first time) jumping last week, everyone will want to know if the Fed's interest rate hikes are indeed slowing down the economy. The job market has continued to be strong, soothing fears that we were in a recession, and this week, economists are expecting that to continue. The forecast is that the unemployment rate will remain unchanged at 3.7%.
If inflation can keep falling while a large number of Americans continue to remain employed, it raises the chances that the central bank might be able to pull off the difficult task of fighting inflation without sending us into a recession.
Markets could react strongly this week, depending on whether investors get the good news they want, or the bad news they don't. If inflation doesn't come down, investors could get worried again that next month, policymakers might decide to hit us with another jumbo rate hike.
And for anyone looking to buy a home, this week could bring good news. Tomorrow we'll find out how much home prices are dropping with the S&P CoreLogic Case-Shiller Home Price Index. That could provide a snapshot of how the housing market is being impacted by higher mortgage rates, which have caused interested buyers to sit on the sidelines and forced sellers to drop their asking prices.
- Kristin
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