Investors will be greeted with a chorus of economic data in the week ahead. Among those listening for some harmony will be Federal Reserve leaders as they prepare to deliver their last interest rate decision of the year.
The tempo of price hikes and new jobs has slowed in recent months, but has either been enough for the Fed to change its tune on interest rate hikes?
The central bank’s melody for months has been fighting high inflation by aggressively raising its short-term target interest rate. The agency’s preferred inflation gauge, the personal consumption expenditures price index, will be released Wednesday. Stock investors will be listening if this inflation barometer is in tune with the consumer price index, which earlier this month showed annual price hikes have quieted a little.
To be certain, inflation remains loud and present in the lives of Americans — and for the central bank. Investors and the Fed will hear how loud on Monday with The Conference Board’s latest consumer confidence survey. Shoppers’ optimism about the direction of prices is a leading voice in guiding the Fed’s thinking. After all, the group is interested in slowing inflation as much as it is in influencing consumer expectations about the direction of prices.
With inflation as the economic melody of the moment, employment is the countermelody. And the November jobs data will echo across markets when it is released on Friday. As the Fed’s higher interest rates work to bring more dulcet price trends, job creation can become more discordant. Higher borrowing costs can cause dissonance for companies and consumers, upsetting the rhythm of steady economic growth. Job growth has slowed slightly but is far from signaling a closing cadence. This gives the Fed confidence to stay on key by continuing to raise interest rates.
The central bank hopes to orchestrate slowing inflation without crushing job creation. Investors hope this week’s economic releases will inspire confidence the Fed will perform a monetary ritardando in mid-December.
Tom Hudson is a financial journalist and chief content officer at WAMU public radio in Washington, D.C. Follow him on Twitter @HudsonsView.