- CPI, Fed minutes, Dudley's speech
Last week, the U.S. economic agenda was shaped by inflation data, Federal Open Market Committee (FOMC) minutes, and the New York Fed Chair William Dudley's messages on monetary policy.
According to official figures released on Tuesday, the month-to-month Consumer Price Index (CPI) remained unchanged in July as expected whereas year-to-year CPI increased by 0.8 percent, slightly under market forecasts.
In the same period, core CPI - excluding food and energy items- rose 0.1 percent monthly and 2.2 percent annually.
The inflation data which came below the recent trend suggested that it might take longer than expected to reach the Fed's 2 percent target.
On a more positive note, industrial production increased 0.7 percent in July, surpassing market expectations of 0.3 percent and marking the strongest jump since November 2014.
Manufacturing output also rose by 0.5 percent, beating expectations, which follows a downward revised but still very respectable 0.3 percent gain in June.
- Fed members increasingly divided over timing of next rate hike
The minutes of FOMC’s July meeting reflected disagreement among Fed members regarding the timing of the next interest rate hike.
According to the minutes, most of the FOMC members vocalized support for waiting for more data before making a move. However some other members “viewed recent economic developments as indicating that labor market conditions were at or close to those consistent with maximum employment and expected that the recent progress in reaching the Committee’s inflation objective would continue, even with further steps to gradually remove monetary policy accommodation,” and argued a rate hike would “soon be warranted.”
Failure to reach a consensus among FOMC members lowered market expectations of a September rate hike from 20 percent to 12 percent.
Furthermore, some of the leading U.S. economists - such as Brooking's David Wessel and Moody's Ryan Sweet - told Anadolu Agency that low inflation is likely to force the Fed to wait until December for the next rate hike.
Still, Dudley said it is possible to increase rates in September. However, his "hawkish" messages were seen as a futile effort to raise low market expectations.
- Yellen and GDP
The most important development of this week will be the speech of Fed Chair Janet Yellen in Jackson Hole, Wyoming. On Friday, Yellen will speak for the first time since mid-June and is expected to give some hints for FOMC's September meeting and beyond.
The second most important item on the economic agenda will be the second quarter GDP figures which will be announced Friday. According to preliminary estimates of last month, the U.S. economy grew 1.2 percent during April-June. The market expectation for the second estimate is 1.1 percent.
Other data to be released this week include new and existing home sales, durable goods orders, weekly jobless claims and consumer confidence.