- Brainard's remarks changed rate expectations
The Federal Reserve Governor Lael Brainard's speech was one of the most influential economic developments last week.
While many Fed officials stated that the U.S. economy is ready for the next rate hike, Brainard warned against moving too quickly.
"Low inflation and uncertain developments ahead counsel prudence in the removal of policy accommodation," she said last Monday at the Chicago Council on Global Affairs.
"I believe this approach has served us well in recent months, helping to support continued gains in employment and progress on inflation," she added.
Following Brainard's dovish remarks, Goldman Sachs lowered its September rate hike probability from 40 percent to 25 percent.
The market expectations for a rate increase in the September Federal Open Market Committee (FOMC) meeting also fell to 15 percent, down from 30 percent from the previous Friday.
- Inflation, retail sales, industrial production
Last week's data releases were also in the focus of markets due to their impact on the Fed's interest rate decision.
According to official data released Thursday, retail sales decreased by 0.3 percent in August, marking the first decline in the last five months. Similarly, industrial production fell 0.4 percent in August, indicating that the manufacturing sector had its worst performance since March.
While disappointing retail sales and industrial production lowered the chances of a rate hike in this week's meeting, Friday's better-than-expected inflation data slightly changed the scenery.
According to the U.S. Department of Labor, Americans' cost of living rose 0.2 percent on a monthly basis and 1.1 percent on a yearly basis. Markets expected a 0.1 percent rise month-on-month and a 1 percent increase year-on-year. The core Consumer Price Index (CPI) also was up more than the anticipated 0.3 percent monthly and 2.3 percent on the year.
- The Fed's interest rate decision, Yellen's remarks
This week's economic agenda will be dominated by the FOMC interest rate decision, which will be followed by Fed Chair Janet Yellen's remarks.
The "dovish" statements of Fed governors such as Brainard and weak sectoral data are suggesting an eventless meeting. However, what the FOMC announcement, economic projections, and Yellen say after the meeting may be worth close attention.
Analysts anticipate a more hawkish sentiment in the Fed’s announcement in order to keep the next two meetings on the table.
- Regional Fed Presidents panel
Two days after the FOMC meeting, a panel organized by the Philadelphia Fed will bring together three regional Fed presidents. Philadelphia Fed President Patrick Harker, Atlanta Fed President Dennis Lockhart, and Cleveland Fed President Loretta Mester will participate in the panel and are expected to share their views on the FOMC decision.