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As data-starved investors stagger toward the end of a barren week suffering from malnutrition, they can take heart from the knowledge that next week is stacked to the rafters with economic data.
And a Fed rate decision, to boot.
Reports on new orders for durable goods, advance trade/inventories data, home price growth and consumer confidence will whet the appetite ahead of a double whammy from the Commerce Department: a second take on Q2 GDP and Warsh & Co.'s preferred inflation yardstick — the Personal Consumption Expenditures (PCE).
Bear in mind that this report harkens back to June, when the words "peace" and "ceasefire" were being seriously bandied about and oil prices were on the decline. A lot can change in a month.
But the real star of the show next week, as Carl Weinberg of High Frequency Economics points out, will be the Fed's rate decision at the conclusion of Kevin Warsh's second monetary policy meeting as chair of the central bank.
"Newly installed Chair Warsh told Congress last week that he is not one to offer forward guidance about what the FOMC might do next," Weinberg writes, though he notes that Warsh indicated that "inflation above 2% will not be tolerated."
Weinberg goes on to note, "Other than June, when inflation metrics were held down by a sharp drop in energy prices, inflation has been rising. Since Warsh's testimony, the war with Iran has reignited."
The note goes on to throw down the gauntlet:
"If we take Warsh at his word, there is no ambiguity: The Fed has to do something about inflation metrics that are already above target and set to rise further."
Weinberg's mic-drop moment comes when he writes, "Warsh cannot maintain cred as an inflation hawk if he recommends the FOMC do nothing in the current environment of accelerating prices."
Financial markets are currently pricing in a 35.8% likelihood of a 25-basis-point rate hike next week, up from just 11.8% a week ago, according to CME's FedWatch Tool.
(Stephen Culp)
SPY•
