Inflation may prompt US Fed to hike rate next month
Earlier in November a robust report on US employment hardened expectations for the Fed’s first rate increase in nearly a decade and if prices are shown to be rising steadily those views will likely solidify.
Reuters polls see inflation at 1.9% year-on-year, unchanged from the previous reading.
Minutes from the Fed’s October meeting will also be published, giving an insight into the Committee’s decision to remove a key sentence on global risks from its policy statement.
“We have had a strong October jobs report and Fed chair Janet Yellen herself referring to a December rate rise as a “live possibility” for the first time,” said Chris Hare, economist at Investec.
“The coming week should shed a little more light on the prospects for tightening this year.”
Attacks by Islamist militants across Paris late on Friday could see increased buying of US Treasuries in the coming week as investors move assets from higher risk equities into a safe haven.
Analysts do not see an impact on the Fed’s monetary policy at this point.
“The knee-jerk reaction in other terrorist attacks over the last decade has been a rush to safety, including aggressive buying in the US Treasury markets,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia.
While most US data has been relatively upbeat, retail sales rose less than expected in October, suggesting a slowdown in consumer spending that could temper expectations of a strong pickup in fourth-quarter economic growth.
In the meantime, Britain’s Bank of England (BoE) was once pegged as likely to be the first major central bank to tighten policy but prices fell again last month, data will probably show tomorrow.
With inflation so far below its 2% target the BoE’s Monetary Policy Committee won’t be raising its benchmark rate from a record low 0.5% until at least April, a Reuters poll found, putting it several months behind the Fed.
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