New York letter, week beginning March 21
- What happened last week?
The most important development last week was the Federal Open Market Committee's (FOMC) meeting.
The dovish decisions and economic projections released by the FOMC followed by Chair Janet Yellen's press conference pointed to a much slower rate hike path than previously expected.
With the new projections, the FOMC now sees just a 0.9 percent funds rate in 2016 and a 1.9 percent level by the end of 2017, both reflecting cuts of half a percentage point.
These numbers suggest two 25 basis points rate hikes this year, followed by two next year.
- Markets cheered dovish Fed
The New York Stock Exchange cheered the dovish Fed and capped its fifth consecutively weekly gain while Dow reached its highest level of the year.
The dollar, meanwhile, posted its third consecutive weekly loss against a basket of major currencies, giving a weekly boost to commodity prices and emerging currencies.
- The economic data
The most important data releases last week were the Consumer Price Index (CPI), retail sales and industrial production.
According to the official report by the U.S. Department of Labor, CPI fell by 0.2 percent in February compared to the previous month matching market expectations.
The Core CPI, which excludes volatile food and energy items, rose by 0.3 percent in February beating the forecast.
In addition, U.S. retail sales fell 0.1 percent in February and figures for January were revised down to a 0.4 percent decline from 0.2 percent increase amid a drop in spending on gasoline and autos, according to Commerce Department data released last Tuesday.
Lastly, industrial production fell 0.3 percent in February after spiking 0.8 percent a month earlier, the Federal Reserve said Wednesday.
- The week ahead
This week's important economic events include data releases and speeches of the regional Fed presidents including FOMC member James Bullard.
Markets will be closely watching the last revision to 2015 Q4 GDP figures, which will be announced on Friday.
Other data include new and existing home sales and durable goods orders for February in addition to weekly unemployment claims and crude oil inventories in the U.S.