This week the markets will be focusing on the Federal Reserve’s interest rate decision. While it is widely anticipated that the policymakers will pause their tightening measures at this time, a larger-than-expected increase in last month’s inflation index may lead to another hike, given conflicting economic data. If the Fed decides to pause, investors’ attention will turn to the tone of the FOMC statement, to determine whether the tone is hawkish or dovish regarding future developments of inflation.
Although there are some reservations as to the extent of the Federal Reserve’s data dependency, Powell and other members of the FOMC committee have stated numerous times that they are closely watching the economic reports; investors then should act similarly. So, apart from the CPI numbers, there are several incoming economic reports that may affect the Fed’s decision this week, as well as its decisions in the next few months.
Here are three economic events that could affect your portfolio this week. For a full listing of all upcoming economic events, check out the TipRanks Economic Calendar.
» May’s CPI &CPI ex. Food and Energy – Tuesday, 06/13 – Headline inflation is expected to decrease to 4.2% year-on-year from April’s pace of 4.9%, while the core inflation is projected to increase marginally to 5.6% from April’s 5.5%. The reports are released at the start of the Federal Reserve’s meeting; higher-than-expected numbers may force the Fed’s hand to forgo its plans to pause the interest rate hikes.
» May’s Retail Sales – Thursday, 06/15 – Retail sales are one of the most important and market-moving indicators published in the U.S. as they provide important information about consumer spending, which significantly impacts the GDP. The sales report provides a good indicator of the current state of the economy, and particularly reflects the underlying inflationary pressures; it is one data point taken into a close consideration by the Fed when it determines the further monetary policy.
» June’s Michigan Consumer Sentiment Index (preliminary reading) – Friday, 06/16 – Consumer sentiment is a very important indicator as it is directly related to the strength of consumer spending. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. Since consumer spending accounts for more than two-thirds of the economy, consumer exuberance could give a boost to inflation, supporting the hawkish case for the Fed.
