The trajectory of the United States' monetary policy is poised to be influenced by a range of upcoming economic indicators, with October's inflation data playing a pivotal role. Federal Reserve Chair Jerome Powell has expressed concerns about being misled by potential "head fakes" in inflation figures, highlighting the importance of the moderate Consumer Price Index (CPI) rise of 0.1% predicted for October. This caution comes ahead of anticipated weak retail sales for the same month, despite positive trends in employment and income.
The economic outlook is further complicated by Moody’s recent decision on Tuesday, Nov 28, 2023, to downgrade its outlook on the U.S. credit rating from "stable" to "negative." This move reflects concerns over the country's fiscal strength amidst a backdrop of political uncertainty. In response to Moody’s action, Pangaea Policy analyst Haines adjusted the probability of a government shutdown to 30%, down from previous estimates.
Adding to the complexity is the political landscape where House Speaker Johnson has proposed a two-step spending plan on Monday, Dec 4, 2023, aimed at averting a government shutdown. This proposal follows Johnson's earlier warning on Friday, Nov 24, 2023, about the potential for a shutdown if Congress fails to approve funding continuation.
Amid these developments, President Joe Biden and Chinese leader Xi Jinping are set to meet at the Asia-Pacific Economic Cooperation summit on Wednesday, Nov 22, 2023. The meeting is significant for establishing future communication channels and delivering key messages between the two largest economies.
Economists are closely monitoring gasoline prices as an indicator of inflationary trends, with beliefs that they may signal an improvement in inflation. The annual inflation rate is currently projected at 3.3%, a decrease from the previous month's rate of 3.7%.
Retail earnings reports due on Thursday, Nov 30, 2023, are expected to shed light on worsening conditions within the sector. Meanwhile, core CPI data—excluding volatile food and energy prices—is anticipated to show a rise of 0.3% on Saturday, Dec 2, 2023.
As investors and policymakers alike scrutinize these indicators, Austin Goolsbee's upcoming Q&A session at the Detroit Economic Club on Tuesday, Nov 21, 2023, gains significance for insights into future Federal Reserve leadership and policy directions.
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