This week the markets will be focusing mostly on the FOMC members’ speeches. The highlight of these will be on Thursday, as Federal Reserve Chair Jerome Powell testifies before Congress, providing a broad overview of the economy and monetary policy.
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As the Fed performed a “hawkish skip,” pausing rate increases for the first time since early 2022, the policymakers also updated their projections for the Fed Funds rate at the end of this year, raising it to 5.6% from the previous 5.1%. Powell said that high and sticky inflation is still a concern, and most members of the Committee see further increases this year as appropriate. Indeed, the updated “dot-plot” projection (a chart that records each Fed official’s projection for the central bank’s key short-term interest rate) signals two more 25 basis point hikes in 2023.
While the Fed’s language was unexpectedly hawkish, it doesn’t mean that these projections are a done deal – if the economy weakens enough to let the inflation cool more than currently expected, the Fed’s “dot plot” may be updated again to match the ongoing economic developments. Conversely, a data-dependent Fed might accelerate its monetary tightening if a tight job market and consumer exuberance support stronger inflation numbers.
That’s why the economic reports coming out between now and the Fed’s next meeting in July are extremely important: they will shape the policymakers’ rate decisions down the road.
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 Housing Starts and Building Permits – Tuesday, 06/20 – Housing starts data provides valuable insights into the health of the housing market and the broader economy, as housing starts typically correlate with economic growth, employment, and consumer spending. Building permit data is used to evaluate whether there’s demand for building new homes, which helps analyze the growth of the economy. Interest rates and inflationary pressures are among the factors that influence both data sets; economists view them as important data points in measuring economic conditions as well as individuals’ and builders’ outlooks for the housing market and the overall economy. Unexpected strength in the housing data may suggest more inflationary pressures down the road.
» May’s Chicago Fed National Activity Index (CFNAI) – Thursday, 06/22 – The CFNAI is a weighted average of 85 existing monthly indicators of national economic activity, which are drawn from four broad categories of data: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories. Research has found that the CFNAI provides a useful gauge of current and future economic activity and inflation in the United States. Therefore, a higher-than-expected reading would reinforce the rate-increases outlook.
» June’s S&P Global Manufacturing and Services PMIs (preliminary readings) – Friday, 06/23 – These purchasing managers’ indexes capture developments in the two dominant sectors of the U.S. economy. The PMIs serve as accurate and timely indicators of business conditions that help analysts and economists to correctly anticipate changing economic trends in official data series such as gross domestic product (GDP), industrial production, employment, and inflation. Higher-than-expected readings would support the Federal Reserve’s case for further rate increases.
