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FOMC and Employment Anchor the Week

David Becker
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The FOMC meeting, a plethora of key data and earnings news, along with a heavy supply calendar could make this coming week a very volatile one. As for the FOMC, it’s unlikely there will be any major surprises in the policy stance or in the forward guidance as a $10 bbillion reduction in QE is pretty much a sure thing. Yet the Fed is clearly on the road to normalization. July payrolls will also headline after the fact and could be a relevant factor in the future policy path.

In the U.S. there should not be any major revelations from the FOMC meeting. After the coming midweek decision by the Fed most expect the central bank to finish its buybacks in October with a $15 billion reduction. While there is likely to be a hot debate over the exit strategy and rate lift-off, Wednesday’s policy statement won’t give anything away in terms of explicit strategies or timing. Indeed, about the only material change in the statement relative to June’s should be a slight upgrade to the economic outlook and labor market conditions, while the statement on inflation should reiterate prices are running below target but longer-term expectations have remained stable.

The employment report on Friday will anchor the already-weighty week, with nonfarm payrolls projected to rise 225k in July. Components including hourly earnings are seen rising 0.2%, while the average workweek holds at 34.5 hours and the jobless rate is steady at an already low 6.1%. The ISM is expected to edge slightly higher to 55.8 in July vs 55.3 in June. Also due are construction spending, seen up 0.7% in vs 0.1% and July domestic vehicle sales are forecast flat at 16.9 million units.

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