Interest Rate Decision In Focus At Federal Reserve Meeting; The Week Ahead

feddcInvestors will be paying close attention this week to a policy decision from the U.S. central bank about raising interest rates along with an updated inflation forecast taken by Fed members during a quarterly survey.

The Federal Reserve has kept interest rates with the federal funds near zero since Dec. 2008 during the depths of the global recession and hasn’t raised interest rates since 2006.

The Federal Reserve will be meeting this week from September 16-17th with a policy rate decision due later on the 17th followed by a press conference with Fed Chair Janet Yellen.

Policy makers at the Fed have been split about deciding about the timing of an interest rate hike with some policymakers suggesting that an interest rate hike is likely to be announced this week at the September meeting while other more dovish Fed members have indicated that the U.S. Central Bank should wait to raise interest rates due to a strong U.S. dollar, low U.S. inflation levels, and weakness in the market due to the Chinese economy and a recent decision by China’s central bank to devalue the yuan.

The August non-farm U.S. jobs report showed that payroll growth increased by 173,000 in August, missing the estimate of 225,000 from while the unemployment rate dropped to a 7 year low at 5.1 percent.

During the past 3 month, job gains have been solid and averaged 221,000 per month.

Over the past 12 months, job gains have risen even higher,  averaging 247,000 per month.

The Fed’s preferred inflation gauge, the personal consumption expenditure (PCE) is still showing weakness and is well below the Fed’s 2 percent inflation target.

July price index for PCE increased 0.3 percent from July a year ago.

The July PCE price index, excluding food and energy, increased 1.2 percent from July a year ago.

Before the Fed’s September meeting this week, Fed members will have some more economic data to consider this week, including retail sales for August which is released on Tuesday and another inflation reading, CPI (August) released Wednesday morning, just ahead of the Fed’s 2 day policy meeting.

U.S. Economic Calendar

Tuesday- Retail Sales (August), Empire Manufacturing (Sept.), Industrial Production (Aug.), Capacity Utilization (Aug), Business Inventories (July).

Wednesday- CPI and Core CPI inflation (August), MBA Mortgage Index (9/12), NAHB Housing Market Index (Sept.), Crude Inventories (9/12).

Thursday- Fed Policy Rate Decision, Initial and Continuing Jobless Claims, Housing Starts (Aug), Building Permits (Aug), Philadelphia Fed (Sept), Current Accont Balance Q2

Friday- Leading indicators (Aug)

-Johnathan Schweitzer

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