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Look forward at December 8 week: The FOMC meeting could be a nonevent, although scrutiny of the SEP will provide points of discussion about the outlook for monetary policy

A look forward at December 9 week instinctively goes straight to the FOMC meeting on Tuesday and Wednesday, December 10 and 11. However, this might prove to be one of the less interesting events of the week.

It is almost universally anticipated that the FOMC will leave short term rates on hold after the October cut and signal for a pause to give the lagged effects of that and the prior two cuts to work their way into the data. Other than the language associated with the last rate action, the statement released at 14:00 ET on Wednesday is likely to read much the same as it did on October 30. Growth has been moderate, the labor market strong, inflation is starting to inch upward in fits and starts, and inflation expectations have risen slightly. If risks to the outlook remain, they are of the same nature as they have been for some time. A resilient US economy is managing to weather these conditions.

The update to the Summary of Economic Projections (SEP) set for release at the same time as the statement will probably also read similarly to the one released on September 18. The FOMC forecast consensus was for moderate growth in 2019 followed by more modest expansion in 2020 and 2021. Still, there was no recession on the horizon and not likely to be one in the next version. What could be the most significant change is an elimination of expected rate hikes. These were modest enough before but policymakers are going to be hesitant to undo the three rate cuts while trade uncertainties linger, global economic conditions remain sluggish, and inflation stubbornly below target.

Chair Jerome Powell’s press briefing at 14:30 ET on Wednesday will probably be an exercise in semantics. The press will want to clarify about whether the rate cuts were a “midcycle adjustment” or an easing cycle. They will want to parse the SEP for every nuance of change in forecasts and implications for future rate actions while Powell will emphasize that the SEP is not intended as forward guidance. Powell is likely to reiterate that the US economy is in a “good place” while policymakers are prepared to take appropriate action should conditions change. He will have to repeat that the central bank sets policy according to the dual mandate and that it never bows to political pressure. The recent wide divides among policymakers will be lessened and perhaps smoothed over if the vote is unanimous this time around. Powell may mention the increase in the Fed’s holdings in terms of providing ample liquidity and its longer range strategy for its balance sheet as opposed to using a larger balance sheet to provide accommodation. He may well touch on the Fed’s review of its monetary policy framework and the progress to date. In the end, I doubt we’ll learn much that is new and/or definitive. That potential will have to wait for the release of the meeting minutes on Friday, January 3.

The end of the communications blackout period at midnight on Thursday means that press outlets are going to scramble to get comments from Fed officials that could not be made after the release of the employment data on December 6, and to try to figure out who could be associated with which dot on the plots in the SEP. If the FOMC consensus has turned more moderate and closer to unanimity than it has been for a while, I expect that to be a relatively fruitless exercise. The main point will be that dissent is less and the outlook less uncertain. Or so I anticipate.

There isn’t a lot of economic data in the week. Pride of place will go to the November numbers on retail and food sales at 8:30 ET on Friday. October’s increase of 0.3% wasn’t bad, but November could get a nice boost from rising motor vehicle sales and a busy weekend at the start of the holiday shopping period. On the other hand, gasoline prices declined in November. However, given the peak travel period around Thanksgiving, some of that may be made up for in volume of sales.

Business inventories for October at 10:00 ET will update the advance data for inventories for retailers and wholesalers. Those for manufacturers were released on December 5. Taken together, these will help shape expectations for GDP growth in the fourth quarter.

Inflation numbers for November will be the Consumer Price Index at 8:30 ET on Wednesday, Final Demand PPI at 8:30 ET on Thursday, and the Import Price Index at 8:30 ET on Friday. Overall the indexes should see only mild increases month-to-month and trend-like gains year-over-year. The gains in energy costs were generally small and other commodity prices could be mixed. If there is much in the way of price inflation, it will be in the service sector, not for goods providers.

Initial jobless claims for the week ended December 7 at 8:30 ET on Thursday is expected to continue the theme of recent weeks. The normal year-end pick up in layoff activity is less this year as businesses hold on to the workers they have out of concern the tight labor market will snap them up and at better wages, which in turn would make them difficult and more costly to replace. The insured rate of unemployment for the November 30 week is anticipated to grind out another 1.2% reading, the baseline for over a year-and-a-half.

The NFIB Small Business Index for November at 6:00 ET on Tuesday might manage to gain some ground and rise for a second month from the 102.4 in October. The NFIB Jobs Report was consistent with actively seeking new employees and a willingness to improve workers’ compensation. This suggests that confidence is solid and the outlook remains positive.

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