This Week's Key Events to Watch as Fed Decision Looms
It's a pivotal week for markets ahead of the highly anticipated Federal Reserve meeting on September 19-20. A series of important economic data releases and speeches from Fed officials will shape expectations for the upcoming policy decision.
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Here are the key dates and events investors need to monitor:
Monday, September 11th
No major economic reports
Tuesday, September 12th
•Consumer Price Index (CPI) for August
The latest inflation data could have a big impact on Fed rate hike prospects. Economists forecast a 0.2% monthly rise in headline CPI and 0.3% increase for core CPI which excludes volatile food and energy.
Wednesday, September 13th
•Producer Price Index (PPI) for August
•Retail Sales for August
•Fed Governor Michelle Bowman speaks
Bowman is a voting FOMC member in 2024, so her comments will be closely watched for rate hike leanings.
Thursday, September 14th
•Weekly Jobless Claims
•Philadelphia Fed Manufacturing Survey
•Housing Starts and Building Permits for August
•Fed Governor Christopher Waller speaks
Waller is another 2024 voter whose speech could move markets.
Friday, September 15th
•Industrial Production for August
•University of Michigan Consumer Sentiment for September
•Fed Governor Lisa Cook speaks
Cook is the final scheduled Fed speaker before the blackout period begins ahead of the FOMC meeting.
Along with the data, investor focus will be squarely on any hints from Fed officials about their stance on whether to raise rates by 25 basis points, 50 basis points, or pause hiking at the September 19-20 meeting. Fed Chair Jerome Powell's latest public comments at the Jackson Hole symposium set an ambiguous tone, so this week's data and Fed speeches will be crucial for solidifying market pricing.
As of Friday, markets were leaning toward pricing in around a 60% chance of a 25 basis point hike, with a 40% probability of a more aggressive 50 basis point increase. A shockingly hot or cold CPI print on Tuesday could quickly shift those oddes. Investors should brace for volatility, with potentially large daily swings in expectations depending on how the data and Fed commentary plays out over the course of the week.
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What Investors Need to Watch
Fed Rhetoric
With several voters set to speak, their language on inflation, economic growth and rate hike preferences will be absolutely critical. Any shifts toward a more hawkish or dovish policy stance could massively impact market pricing.
CPI Data
Tuesday's CPI report is the obvious headliner with potential to swing rate expectations dramatically if it surprises in either direction. But other releases like PPI, retail sales and consumer sentiment will also play a role in shaping the Fed's outlook on the economy.
Market Pricing
Heading into the week, fed funds futures were pricing around 60% odds of a 25 bps rate hike and 40% chance of a 50 bps hike. These probabilites are likely to get whipsawed by the incoming data.
Volatility Levels
With so much uncertainty surrounding the Fed decision, traders should prepare for big intraday market swings and volatility spikes or plunges based on how the data and Fedspeak impacts rate expectations.
Economic Growth vs. Inflation Fight
The Fed remains laser-focused on getting inflation under control, but is also trying to engineer a "soft landing" without sparking a severe recession. Investors will be watching how policymakers weigh these competing priorities based on the latest economic signals.
Positioning Ahead of the Decision
Some investors may choose to hold off on making major portfolio adjustments until after the Fed meeting next week to wait for more clarity. Others could look to capitalize on any big intraday moves if market pricing gets thrown out of whack by the events of the coming days.
With so many potentially market-moving catalysts, having a clear game plan and risk management strategies in place will be essential for navigating this pivotal week. Staying nimble and flexible will allow investors to respond to surely evolving Fed expectations before the all-important policy decision is ultimately revealed next Wednesday.
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