The November 7 week is shortened by the observance of Veterans Day on Friday. Given the scanty data schedule during the week, it won’t significantly impact the economic news. The federal holiday means a full market close for bonds though stocks will be open; Veterans Day is not universally observed. Some businesses will be open and swap November 11 for a day off on November 25, the day after Thanksgiving. In any case, the upcoming three-day weekend is likely to include a push by brick-and-mortar retailers to encourage early birds among holiday shoppers.
The only report certain to be of major interest in the week is the October CPI data at 8:30 on Thursday. Total CPI inflation has been seeing only incremental improvement in the last few months with broad-based and persistent gains. Overall CPI inflation has seen continued upward pressure from food and shelter costs, although energy prices have provided some offset. It is notable that prices have been rising for services where pass-through of higher operating costs has been swift, whereas commodities costs are easing. Econoday’s Consensus Divergence Index is also something to consider; this is running in the plus column at 18 to indicate that economists have been underestimating the strength of the real economy as well as the strength of inflation readings.
Fed policymakers are likely to feel justified in the 75 basis point rate hike on November 2 – the fourth consecutive such increase. This was consistent with their stated goal of hiking as appropriate and maintaining restrictive monetary policy until inflation is sustainably moving toward the Fed’s 2 percent target. So far the strength in the labor market has allowed them to do so, but signs of moderation in hiring may contribute to a slower pace of rate hikes in the near future.
