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Investing.com – Markets and observers await a handful of crucial data that will provide more clarity on the Fed’s next move.
It is expected that other readings of US consumer data that will be important in the decisions that the Federal Reserve will take to confront inflation and interest rates later this week.
This comes amid a debate among central bankers about the need to adjust the pace of interest rate increases in light of rising fears of a global recession.
The US personal consumption expenditures price index is expected to have increased by 0.5% in January from the previous month, the biggest advance since mid-2022, according to Bloomberg.
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expected increase
Economists polled by Bloomberg expect a 0.4% advance in the core gauge, which excludes food and fuel.
Data expected to be released on Friday will confirm the full participation of the US consumer, as economists expect the largest rise in spending on goods and services since October.
Labor market
This week’s report is also expected to show the largest increase in personal income in a year and a half, supported by a flexible labor market and a significant adjustment in the cost of living for Social Security recipients.
According to expert forecasts, income and spending data are expected to highlight the challenge facing the Fed in its tightening campaign.
The report comes on the heels of figures released last week which revealed that retail sales and consumer and producer price data rose more than expected.
Amazing
Economists at Bloomberg Economics including Anna Wong, Eliza Winger and Stuart Ball say the year-on-year decline in inflation has stalled which is astounding and supported by a favorable fundamentals and supply environment.
Investors have raised their bets on how far the Fed will raise interest rates, now expecting them to reach the 5.3% range in July.
Federal minutes
Minutes of the Fed’s last policy meeting are expected on Wednesday, during which the US central bank raised its benchmark interest rate by 25 basis points.
The readings may help illuminate the appetite for a larger increase when policymakers meet again in March.
50 basis points
Cleveland Fed President Loretta Mester said earlier this month that the current economic situation is convincing for another 50 basis point rate hike.
On the other hand, James Bullard of the Federal Reserve in St. Louis said he ruled out supporting such an increase in March.
This week, new and existing home sales figures for January will be released, along with a second estimate of GDP for the fourth month.
investment banks
Analysts from Goldman Sachs (NYSE:) and Bank of America indicated that they expect the US Federal Reserve to raise interest rates three more times this year, and raised their estimates after data indicated persistent inflation and a strong labor market.
Producer prices rose in January by the largest margin in seven months, according to Thursday’s data, while a Labor Department report showed that the number of Americans filing new claims for unemployment benefits fell unexpectedly last week.
Goldman Sachs economists led by Jan Hatzius said that in light of stronger growth and more stable inflation news, we are adding a 25 basis point (bp) rate hike in June to our Fed outlook.
In light of this, interest rates will reach a peak funds rate of 5.25%-5.5%,” Goldman Sachs analysts continued in the note.
Interest pricing
Financial market expectations indicate that the interest range will reach 5% and 5.25%, compared to the current level between 4.5% and 4.75%.
The Federal Reserve raised interest rates 8 times in a row, to reach the range of 4.5% and 4.75%, compared to the level near zero last March.
Markets are currently pricing interest rates in the range of 5% and 5.25%, compared to the current level between 4.5% and 4.75%.
This comes after the Fed raised interest rates 8 times in a row, to reach the range of 4.5% and 4.75%, compared to the near-zero level last March.
