Key Events In The Coming Week: Yellen's Swan Song And Final Rate Hike; Draghi's Silence, US Inflation

After last week's payrolls report, the year is starting to wind down for economic events and capital markets, but not before one last hurrah for central banks: indeed, it is a very busy week dominated by central bank meetings for the FOMC, ECB, BOE, SNB and Norges Bank. We will also observe the controversial Alabama Senate elections and the EU Council summit on the state of Brexit negotiations. Data-wise, the most important economic update will be Wednesday's US CPI print, as well as industrial production releases in a number of countries including the US and China.

Wednesday will bring the release of November’s CPI data with analysts looking for a headline 2.0% Y/Y, while the core release is expected to moderate to 1.7% Y/Y from 1.8% last time out. HSBC suggest that “that are signs that owners equivalent rent has stabilised following some recent softness,” which could bode well for the print going forwards. Thursday will bring the release of November’s retail sales data with consensus looking for the headline to rise by 0.3% M/M from last month’s 0.2%, the core print is expected to rise by 0.6% M/M from 0.1%, while the control group is expected to rise by 0.4% M/M against last month’s 0.3%. There are suggestions that the dip in auto sales could offset the pop in gasoline prices in the upcoming release.

However, the week's biggest event is Wednesday's FOMC meeting, which is also Janet Yellen's last address to the broader public as FOMC chair (the Jan 31, 2018 FOMC meeting will have no press conference) when everyone, and the market, now expects the Fed to hike rates by 25bp to a range of 1.25%-1.50%. In the Summary of Economic Projections economists expect a slightly more positive tone with an upward revision to growth (2.3%), downward revision to long run unemployment (4.5%) and slight shift higher in the dots starting in 2019. At the press conference Yellen will likely address the hiking cycle, tax reform and flattening of the yield curve.

Some more details from RanSquawk:

The final Federal Reserve monetary policy decision of 2017 will occur on Wednesday. Money markets have been pricing a 25bps hike at the upcoming meeting for some time, which would take the Federal Funds Rate target to 1.25-1.50%. Minneapolis Fed President Kashkari is likely to continue to express his dissent over the tightening of monetary policy, while there will also be attention on Chicago Fed’s Evans, who has recently cautioned on hikes. “The Minutes for the November meeting and recent Fedspeak show growing concern about inflation, but not enough to stay their hand at this meeting,” writes UBS. UBS believes that the ongoing recovery in inflation from its transitory weakness will be reflected in the statement. The FOMC is due to update its economic projections, and there may be scope for upward revisions. Presently, analysts are more optimistic than the Fed regarding growth and inflation; with regards to the rate of joblessness, the market and the Fed’s views are more-or-less in-line from 2018 onwards. The post-meeting press conference with Chair Janet Yellen will be her last, and she is expected to strike a balanced tone regarding future policy, reiterating her view that the FOMC will tighten policy gradually (as the incoming Fed Chair Powell recently endorsed in his confirmation hearing).

One day later, the ECB can afford to be boring on Thursday, as the important decisions were taken in October. No rate hike or taper will be announced, so focus will be on new forecasts, extended to 2020. Expect ECB confidence in its policy decisions to be high, reflected in core and headline inflation remaining on target (1.8%) in 2020. Looking ahead, however, the ECB will likely be forced into steeper inflation forecasts as we inflation prints remain stubbornly low next year. Focus will be on the Q&A session and whether Draghi will comment on the apparent disconnect between markets and the ECB (given the low level of rates). More from RanSquawk:

The European Central Bank (ECB) will issue its latest monetary policy decision on Thursday. After the ECB set out its short-term platform at its most recent decision, the upcoming meeting is set to be a rather low-key affair. With analysts looking for no change to the Bank’s monetary policy settings following the recently issued guidance, focus will fall on the staff’s macroeconomic projections. HSBC suggest that “the main news since September is a higher oil price (up around 20%), which we expect will raise the ECB’s 2018 inflation forecast from 1.2% to 1.5% add 0.1% to its 2019 projection. It will also publish a 2020 forecast for the first time, which we expect to be 1.8% and therefore close to, but less than, 2% and consistent with the ECB’s aim. Growth may be nudged up by 0.1% in 2017 and 2018, reflecting ongoing strength in leading indicators since September.” It is also worth noting that the Bank’s assumed EURUSD for projections currently stands at 1.18. Of course, focus will fall on the post-decision press conference, with market participants on the lookout for fall on any notable shift in rhetoric.

The BOE will be likewise boring, and will keep its rate at 0.5%, with the asset purchase target at 435bn and the corporate bond target at 10bn.

Monetary policy meetings will also be held in Russia, Mexico, Turkey, Indonesia, Chile, Colombia, Peru, Ukraine and the Philippines. Russia's CBR will likely cut 25bp while Mexico's Banxico will likely hike 25bp.

In other data:

  • In the US, it is a busy week with CPI, PPI, retail sales, industrial production, empire manufacturing and capacity utilization.
  • In the Eurozone, we have PMIs and industrial production. We also highlight the European Council's meeting with Brexit in the agenda.
  • In the UK, we have CPI, RPI, PPI, labor market report and retail sales.
  • In Japan, money supply, PPI, PMI Mfg., core machine orders, final print of industrial production and Tankan survey.
  • In China, we have CPI, PPI, money supply, retail sales, financing data, industrial production and fixed assets investments.

A breakdown of key daily events from RanSquawk:

  • Tuesday: UK Inflation Data (Nov)               
  • Wednesday: FOMC MonPol Decision, US CPI (Nov), UK Labour Market Report (Nov/Oct)
  • Thursday: EU Summit, ECB, BoE & SNB MonPol Decisions, US Retail Sales (Oct) Australian Labour Market Report (Nov) 
  • Friday: Japanese Tankan Survey (Q4)

Summary snapshot courtesy of Bank of America:

A detailed preview of the week ahead from Deutsche Bank:

  • Monday: A pretty quiet start to the week with the only data release of note being the October JOLTS job openings report in the US. Away from that, chief technical negotiators for the US, Mexico and Canada are due to meet for more talks on NAFTA. Also worth highlighting is a scheduled meeting of EU diplomats to discuss the state of Brexit negotiations.
  • Tuesday: Inflation releases highlight the data docket on Tuesday with the November CPI/RPI/PPI prints due in the UK, and November PPI due in the US. The December ZEW survey will also be released in Germany while the November NFIB small business optimism and November monthly budget statement data are also out in the US. Away from the data, ECB President Draghi is scheduled to speak in Frankfurt while in the US a special general election will be held in Alabama to fill the US Senate seat which has been vacated by Attorney General Jeff Sessions.
  • Wednesday: All eyes will be on the US on Wednesday with both the November CPI report due out, and also the conclusion of the two-day FOMC meeting with a 25bp hike likely to be announced. Fed Chair Yellen will follow with a press conference. Also of significance is a scheduled discussion between European parliamentarians and European Commission President Juncker and European Council President Tusk around the state of Brexit negotiations. Other data releases on Wednesday include the final November CPI revisions in Germany, October and November employment data in the UK, and October industrial production data for the Euro area. Finally, the BoJ’s Kuroda is due to make a brief speech in the morning. President Trump may speak on tax reforms today and Germany’s Merkel and SPD will also start formal coalition talks.
  • Thursday: A packed day from start to finish. The highlight is the scheduled European Council meeting in Brussels which continues into Fri day. We’ve also got two central bank meetings due with both the BoE and ECB set to hold their last monetary policy meetings of the year. Datawise we’ll get the flash December PMIs in both Europe and the US, as well as the November retail sales data for the UK and US. Other notable data prints include the November retail sales, fixed asset investment and industrial production data in China, final November CPI revisions in France, November import price index reading and weekly initial jobless claims data in the US, and finally the Q4 Tankan survey late in the evening for Japan.
  • Friday: The conclusion of the EU Council summit will be the main focus for markets on Friday. Away from that it should be fairly quiet with October trade data for the Euro area, along with the December empire manufacturing and November industrial production prints in the US the only data due.

Finally, here is Goldman with a focus on only the US along with consensus estimates: The key economic releases this week are the CPI report on Wednesday and retail sales on Thursday. The December FOMC statement will be released on Wednesday at 2:00 PM EST, followed by Fed Chair Yellen's press conference at 2:30 PM.


Monday, December 11

  • 10:00 AM JOLTS job openings, October (consensus 6,100k, last 6,093k)

Tuesday, December 12

  • 06:00 AM NFIB small business optimism, November (consensus 104.0, last 103.8)
  • 08:30 AM PPI final demand, November (GS +0.2%, consensus +0.3%, last +0.4%); PPI ex-food and energy, November (GS flat, consensus +0.2%, last +0.4%); PPI ex-food, energy, and trade, November (GS +0.2%, consensus +0.2%, last +0.2%): We expect a 0.2% increase in the headline PPI in November, reflecting some deceleration in core producer prices and firmer energy prices. The October report showed a sizeable increase in the volatile trade services component, and we expect some retrenchment in the November report. We estimate a 0.2% increase in the PPI ex-food, energy and trade services category.
  • 02:00 PM Monthly budget statement, November (consensus -$134.5bn, last -$136.7)

Wednesday, December 13

  • 8:30 AM CPI (mom), November (GS +0.40%, consensus +0.4%, last +0.1%); Core CPI (mom), November (GS +0.21%, consensus +0.2%, last +0.2%); CPI (yoy), November (GS +2.24%, consensus +2.2%, last +2.0%); Core CPI (yoy), November (GS +1.80%, consensus +1.8%, last +1.8%): We estimate a 0.21% increase in November core CPI (mom sa), which would leave the year-over-year rate unchanged at +1.8%. Our forecast reflects post-hurricane strength in new and used car prices, energy-price related strength in airfares, and a modest rise in apparel prices reflecting solid holiday shopping trends, colder weather, and leaner retailer inventories. On the negative side, we expect a pullback in the lodging away from home category. We estimate a 0.40% increase in headline CPI, primarily reflecting a boost from energy prices. This would leave the year-over-year rate two-tenths higher at 2.2%.
  • 02:00 PM FOMC statement, December 12-13 meeting: As discussed in our preview, a third rate increase this year from the FOMC is extremely likely next week, and market attention will likely focus on the 2018 outlook and how the Fed will respond to tax reform. The economic data since the November meeting have been reassuring, with strong GDP and employment reports and firmer inflation data. The statement will likely include modest changes to reflect this news. We expect the FOMC to revise up their GDP projections slightly and lower their unemployment rate projections, which appear quite dated. While our own forecast is for quarterly hikes in 2018 and 2019, we expect the median fed funds rate projection to remain at 3 hikes for 2018 and move up to 3 hikes for 2019. Further upward revisions to the economic and funds rate projections are likely to occur at the March meeting if tax reform is ultimately passed, in our view.

Thursday, December 14

  • 08:30 AM Retail sales, November (GS +0.4%, consensus +0.3%, last +0.2%); Retail sales ex-auto, November (GS +0.7%, consensus +0.7%, last +0.1%); Retail sales ex-auto & gas, November (GS +0.4%, consensus +0.4%, last +0.3%); Core retail sales, November (GS +0.4%, consensus +0.3%, last +0.3%): We estimate core retail sales (ex-autos, gasoline, and building materials) rose at a brisk 0.4% pace in November, reflecting solid online sales results and some sequential improvement in brick and mortar trends. The timing of the iPhone launch (iPhone X on November 3) also appears poised to boost Census sales growth in the upcoming report. Given the sharp increases in gas prices but sequential pullback in auto SAAR, we estimate 0.4% and 0.7% respective increases in the headline and ex-auto measures.
  • 8:30 AM Initial jobless claims, week ended December 9 (GS 235k, consensus 239k, last 236k); Continuing jobless claims, week ended December 2 (consensus 1,905k, last 1,908k): We estimate initial jobless claims declined 1k to 235k in the week ended December 9, continuing its gradual downtrend in recent weeks. Hurricane-related claims in Puerto Rico appear to have peaked, and we note that filings are currently somewhat elevated in California and Texas. Continuing claims – the number of persons receiving benefits through standard programs – pulled back sharply in the previous week, an encouraging confirmation that the extent of job loss has remained low.
  • 08:30 AM Import price index, November (consensus +0.7%, last +0.2%)
  • 09:45 AM Markit Flash US Manufacturing PMI, December preliminary (consensus 53.6, last 53.9)
  • 09:45 AM Markit Flash US Services PMI, December preliminary (consensus 54.2, last 54.5)
  • 10:00 AM Business inventories, October (consensus -0.1%, last flat)

Friday, December 15

  • 08:30 AM Empire manufacturing survey, December (consensus +18.3, last +19.4)
  • 09:15 AM Industrial production, November (GS +0.8%, consensus +0.3%, last +0.9%): Manufacturing production, November (GS +0.5%, consensus +0.2%, last +1.3%); Capacity utilization, November (GS 77.5%, consensus 77.2%, last 77.0%): we estimate industrial production rose 0.8% in November, as the mining production category rebounds and the manufacturing production category strengthens further. We expect manufacturing production rose 0.5%, reflecting a combination of stronger auto production and general improvement in other manufacturing categories.
  • 04:00 PM Total net TIC flows, October (last -$51.3bn)

Source: BofA, DB, Goldman

Comments

shizzledizzle Mon, 12/11/2017 - 09:45 Permalink

I hope someday Bernanke and Yellen are recognized as treasonous bastards that brought this country to it's financial knees. Powell might well (will likely) make that list but the resposibility lies squarely on Yellen and Bernanke's shoulders. Like Jim Layhe said, "You plant shit seeds, ya get shit weeds."

eclectic syncretist Mon, 12/11/2017 - 10:59 Permalink

Don't rock the boat right before the banksters all leave for extended drunken holidays where they try and fail to atone for the years sins accumulated from a life devoted to mammon rather than people, nature, and God.

redmudhooch Mon, 12/11/2017 - 13:41 Permalink

Fuck (((bankers))) Fuck parasites. End the Fed.Return the looted money to the people it was stolen from.MAGA! Not possible with a criminal cabal calling the shots.