Most of the time, we have all of the important data points in order to better evaluate what might happen before an FOMC decision is made. However, this time the Fed will release the most critical data during the first day. This is expected to happen later today. Tomorrow will see the FOMC release its decision.
According to data, there could be a significant reevaluation about what the Fed will do tomorrow and what it might signal in the new Year. Both factors are expected to be determinate for the market’s reaction, as it prices in expectations for where the rates will be in the coming months.
Is there another surprise in the CPI?
It is important to remember that the US CPI (for October), came in below expectations last year. A look at the components showed that economists hadn’t considered just how much the price of housing had fallen that month. Since then, there hasn’t been a recovery in this item. The largest factor that drives inflation, energy costs have been falling, as crude oil prices fall over fears of a recession.
No one knows what the future holds. Markets expect the Fed to be more inflationary than they are. Even if there was…