This morning’s U.S. pre-cash open has a slew of data metrics on tap facing the production and employment facets of the U.S. economy. Yesterday’s FOMC minutes gave us a few things to talk about, but very little action. Perhaps today’s numbers will drive participation.
Is it the return of good times for main street U.S.A.?
A few of the comments out of the FOMC meeting were interesting, as they showed differing opinions among members of the committee. The bottom line is that there are no real reasons to raise interest rates in December. Inflation targets have not been hit, and the economy is performing with vigor. Why upset the applecart?
What will the FED ultimately do? It is clear that they are a bit baffled by how the U.S. economy is performing. Will monetary policy turn aggressive as we near 2017?
Stay tuned. We most certainly are going to find out.
One quote stood out from Wednesday’s FOMC minutes regarding the pending December rate hike: “The decision will depend on whether the economic data in coming months increases confidence towards inflation rising to the 2% target.”
In layman's terms, inflation does not have to reach 2% for a rate hike. The metrics just have to show that it might.
Here is today’s batch:
Event Previous Projected Actual
Continuing Jobless Claims (Sept. 29) 1.921M 1.935M 1.889M
Initial Jobless Claims (October 6) 258K 251K 243K
Producer Price Index (MoM, August) 0.2% 0.4% 0.4%
Producer Price Index (YoY, Sept.) 2.4% 2.5% 2.6%
It is important to realize that statistics can be used to prove nearly anything. If the FED wants to build a case to raise rates in December, then they will. Inflation is not likely to hit 2% this year, and with retail sales looking at a potentially robust U.S. holiday season, the economy can go even higher.
Future actions of the FED can be challenging to successfully predict. Nonetheless, it is a good idea to keep an eye on these metrics as well as the tone in which the market receives them. As we roll on towards 2018, they will be assigned more value.