This week, investors’ attention will be drawn to the speeches by FOMC members. The most anticipated of these is on Thursday when Federal Reserve Chair Jerome Powell will provide his perspective on the economy and monetary policy.
Last week, the central bank’s Board of Governors opted not to raise its primary policy rates, signaling yet another “hawkish pause.” However, they left the possibility of another rate hike this year on the table. Policymakers also revised their “dot-plot” projection, a chart showcasing each Fed official’s expectations for the central bank’s key short-term interest rate. This updated outlook reinforced the Fed’s hawkish inclination, emphasizing a strategy of maintaining elevated rates for an extended period.
Although the Fed’s tone was decisively hawkish, it’s important to note that these projections aren’t set in stone. If the economy slows down significantly, causing inflation to decelerate more than anticipated, the Fed might adjust the “dot plot” to reflect the evolving economic landscape. On the other hand, if robust employment numbers and heightened consumer confidence bolster inflation, a data-driven Fed could expedite its monetary tightening.
This underscores the significance of economic reports released between now and the Fed’s next meeting on October 31st. These findings will heavily influence policymakers’ subsequent rate decisions.
» September’s Consumer Confidence Index – Tuesday, 9/26 – Released by the Conference Board, this report measures the degree of consumer confidence in economic activity. Given that consumer spending accounts for roughly 70% of the U.S. GDP, this Index serves as one of the paramount leading indicators.
» Q2 2023 GDP Growth Annualized (final reading) – Thursday, 9/28 – After an initial estimate that came in below expectations and a subsequent upward revision in the second reading, this final reading will confirm the actual growth rate of the U.S. economy for the second quarter. This data not only provides insight into past economic growth but also offers clues about near-term trends. The Federal Reserve will certainly factor in this data when formulating its interest rate policy.
» August’s Core Personal Consumption Expenditures – Friday, 9/29 – Published by the Bureau of Economic Analysis, this report details consumer spending during the specified period. The Core PCE Index is the Federal Reserve’s principal gauge for inflation and serves as the benchmark for its inflation-targeting strategies. Consequently, it ranks among the most pivotal reports influencing the Fed’s policy decisions.