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What to know in the next week



rocked by a volatile stretch of stock market trading last week, This week they will turn their attention to the September meeting of the Federal Open Market Committee (FOMC), along with two key reports on the state of the consumer in the US “data-reactid =” 16 “> Investors, shaken by a period of volatile trading in stock markets last week, this week will turn their attention to the September meeting of the Federal Open Market Committee (FOMC), along with two key reports on the state of the consumer in the United States

FOMC meeting

annual symposium on economic policy, during which officials announced a new framework to inform their thinking on setting rates in light of inflation. The updated framework will allow for a moderate overshoot of their inflation target of 2%, alleviating the urgency for officials to step in and raise rates to avoid a rush to inflation. “Data-reactid =” 22 “> The next FOMC meeting Tuesday and Wednesday comes just weeks after the central bank’s annual economic policy symposium, during which officials announced a new framework to inform their thinking on rate setting In light of inflation, the updated framework will allow for a moderate overshoot of their inflation target of 2%, alleviating the urgency for officials to step in and raise rates to avoid a rise in inflation.

However, in announcing this decision, Federal Reserve Chairman Jerome Powell omitted specifics of how the FOMC would achieve higher average inflation after years of failing to reach its target, leaving the committee to discuss tactics at upcoming meetings. . Many economists expect details of the central bank’s means to implement its new framework will remain elusive at the September meeting.

“We don’t expect major political innovations at the September FOMC meeting,” Nomura economist Lewis Alexander wrote in a statement. “Recent comments from FOMC participants suggest that consensus for stronger, results-based forecast guidance or significant changes to asset purchases still remains a long way off.”

“Coming months” and Chicago Fed President Charles Evans said so “It could be useful in the not too distant future.” Others, however, have hinted at a less pressing timeline, with Loretta Mester of the Federal Reserve Bank of Cleveland suggesting there may not be a “Immediate need” for the move, and Raphael Bostic of the Federal Reserve Bank of Atlanta told the Wall Street Journal that he didn’t “I think we’re there now.”“data-reactid =” 25 “> That is to say, participants have not yet seemed to agree on the timing in which specific guidance should be offered forward, Alexander pointed out. In separate recent comments, Fed Governor Lael Brainard said that policies could be invoked in the “coming months,” and Chicago Fed Chairman Charles Evans said these “could be useful in the not too distant future.” Others, however, have hinted at a less pressing timeline. with Loretta Mester of the Federal Reserve Bank of Cleveland suggesting there may not be an “immediate need” for the move, and Raphael Bostic of the Federal Reserve Bank of Atlanta telling the Wall Street Journal that “I didn’t think we’re there now.”

zero limit across the forecast horizon of 2022, and the updated print will include officials’ perspectives through 2023. “data-reactid =” 26 “> That said, the discrete views of FOMC officials on the path to take for medium and long-term interest rates will become sharper relief with the updated summary of the central bank’s economic projections – or “dot plot” – expected to be released again this week. Officials so far have telegraphed that the federal funds rate would remain at zero over the forecast horizon of 2022, and the updated print will include officials’ perspectives through 2023.

In an interview with NPR earlier this month, Powell warned that a slow post-virus economic recovery and still weak inflationary trends will mean that keeping rates at zero “will be measured in years”. “Data-reactid =” 27 “> In an interview with NPR earlier this month, Powell signaled that a slow post-virus economic recovery and still weak inflationary trends will mean that keeping rates at a zero limit” will be measured. in the years”.

“As a result, we believe the midpoint will be zero in 2023,” UBS economist Seth Carpenter said in a statement. “To be sure, there will be others who are more optimistic and will take off in 2022 and 2023, but probably not the median and not the Fed leadership. The economic outlook requiring such a position probably hasn’t changed much from the June screenings “.

Unemployment rate of 3.5% with inflation below target it will mean that any projected increase in inflation will be gradual, “Carpenter added.” data-reactid = “29”> “The surprise drop in the unemployment rate in August will likely be discounted and we suspect that the latest expansion is 3.5% Unemployment rate with inflation below target will mean any increase inflation is expected to be gradual, ”Carpenter added.

WASHINGTON, June 10, 2020 – Photo taken on June 10, 2020 shows the live broadcast of US Federal Reserve Chairman Jerome Powell’s speech during a press conference in Washington D.C., United States. The U.S. Federal Reserve held its benchmark interest rate unchanged at a record low near zero on Wednesday amid the escalating fallout from the COVID-19-induced recession and expects interest rates to remain at their current level until at least 2022. (Photo by Liu Jie / Xinhua via Getty) (Xinhua / Liu Jie via Getty Images)

Meanwhile, Powell’s press conference, scheduled for Wednesday afternoon following the conclusion of the monetary policy meeting, is expected to include remarks that set a cautious tone to the pace of economic recovery amid the ongoing pandemic, even as economic data just published are moving in a slightly more positive direction.

“The risk of another wave of coronavirus as flu season approaches has been a recurring risk theme in recent times,” RBC Capital Markets economists wrote in a statement on Friday. “Ultimately, there is no benefit to the committee from being positive at this juncture. They will continue to be cautious and, if they get it wrong, nobody will care. Considering that if they become positive and are wrong, it could be a disaster for credibility. “

“We expect much of the questions and answers at the press conference to focus on recent changes to the monetary policy framework,” they added. “Most of what Powell touched on Jackson Hole was very future-oriented. So we will hear about 1) greater willingness to let inflation exceed 2% (the provisions for the average inflation) and 2) let the unemployment rate slide well below the natural rate in the future (the gap of Employment and Inflation promoted by Powell). From our goal, the recent changes are only a concretization of an already active process “.

Retail sales, consumer confidence

On the economic data front, the August retail sales report released on Wednesday will attract considerable attention, offering an updated view of the state of consumption at the end of the summer with further reduction in firm orders.

The pace of earnings in monthly retail sales has slowed considerably from the record surge of 18.2% in May. Retail sales in July rose 1.2% to climb above pre-pandemic levels, leaving “much less room now for quick monthly gains,” Michael Pearce, senior US economist for Friday, said in a statement on Friday. Capital Economics.

Consensus economists expect to see a 1.0% month-over-month increase in retail sales in August, following a 1.2% rise in July. This would mark the fourth consecutive month of monthly retail sales increases.

“Some sectors have continued to struggle and, following renewed loosening of restrictions as new virus cases have trended downward, there is room for a stronger increase in bar and restaurant spending in August,” Pearce added. “Apparel sales may also continue to recover. But building materials likely continued to decline after their previous increase, while most other categories recorded more modest gains. “

from 74.1 of August. The index has maintained a holding pattern since hitting bottom during the April pandemic period at 71.8, as consumers continue to cite concerns about the pandemic and the resulting economic hardship. “Data-reactid =” 53 “> A separate report coming out on Friday will reflect consumer status through a different lens. The University of Michigan is poised to publish its consumer surveys, which are expected to show consumer sentiment. rose only marginally to an index level of 75.0 in early September, from 74.1 in August The index maintained a holding pattern from its low during the pandemic period in April to 71.8 as consumers they continue to cite concerns about the pandemic and the resulting economic hardship.

Economic calendar

Earnings calendar

LEN) after the close of the market “data-reactid =” 61 “>Monday: Lennar (LEN) after the market closed

ADBE), FedEx (FDX) after the close of the market “data-reactid =” 62 “>Tuesday: Adobe (ADBE), FedEx (FDX) after market close

@emily_mcck“data-reactid =” 67 “>Emily McCormick is a journalist for Yahoo Finance. Follow her on Twitter: @emily_mcck

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