- Hawkish statements from Fed officials
The U.S. economic agenda last week constituted Federal Reserve officials’ remarks and macroeconomic data along with the developments of the new administration.
During her testimony to Congress on Tuesday, Fed Chairman Janet Yellen said that waiting too long to raise interest rates would be "unwise".
"At our upcoming meetings, the Committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate," Yellen added.
The hawkish statement of Yellen's was further enhanced by similar messages from other Fed officials. The Federal Reserve may have to raise interest rates by more than the central bank has forecast, Boston Fed President Eric Rosengren said Wednesday. The median forecast of Fed officials is for three rate hikes in 2017.
Following Rosengren’s speech on Wednesday, Philadelphia Fed Chair Partick Harker reiterated his support for three rate hikes.
"I see three (interest-rate) hikes as appropriate for 2017, assuming things stay on track," said Harker, one of the Fed's 10 voters this year on monetary policy. Richmond Fed President Jeffrey Lacker also indicated that the next rate increase should occur sooner rather than later.
On the other hand, Fed Vice President Stanley Fischer chose a less hawkish tone. “The Fed is a little more confident about where we’re going and how soon we’ll get to full employment with stable prices,” he said in an interview on Bloomberg TV.
- Inflation rose, industrial production declined
Among the data released last week in the U.S., inflation indicators were among the most pronounced. Consumer and producer price indexes rose by 0.6 percent in January, marking the biggest increase in the last four years, indicating that inflationary pressures are strengthening.
On the other hand, industrial production in the country contracted by 0.3 percent in January and housing starts declined by 2.6 percent.
The most positive data for the week was probably the Philadelphia Business World Index, which rose to 43.3 in February, marking the highest level since 1983. Retail sales also rose by 0.4 percent, beating the market expectation of a 0.1 percent increase.
Finally, in the week ending Feb. 11, the number of applicants for unemployment benefits increased by 239K.
- Trump's economic management is two steps forward, one step back
The approval of former Goldman Sachs partner Steven Mnuchin as the new Treasury Secretary and Mick Mulvaney as the new White House Budget and Administration Office (OMB) Director were among other highlights of last week's economic agenda. The U.S. Senate has also approved Scott Pruitt's nomination to lead the Environmental Protection Agency (EPA) despite strong opposition from Democrats.
However, Trump's Labor Secretary candidate Andrew Puzder withdrew his nomination amid staunch opposition from labor groups, upon revelations that he personally hired illegal workers, along with allegations of domestic violence.
Trump showed Alexander Acosta, a graduate of the Harvard University law school, as a replacement nominee.
- Focus of new week will be the FOMC minutes
The new week in the U.S. will start slowly with Monday’s public holiday celebrating President's Day.
While the remarks of several Fed officials this week will be closely watched, the main attention will be on the Federal Open Market Committee minutes, which will be released on Wednesday.