The Economic Week Ahead: December 11 - 15

The big event of the week will be the FOMC meeting (Tue & Wed) followed by Fed Chair Jerome Powell's presser (Wed @ 2:30 pm). December's Summary of Economic Projections (SEP) will be released along with the Dot Plot after the meeting. The markets have most likely fully discounted what Powell will say and what the SEP and Dot Plot will show.

Powell will say that the federal funds rate is well into restrictive territory implying that the Fed is done raising the federal funds rate. He will also acknowledge that much progress has been made in bringing inflation down (without a recession), but inflation still remains high relative to the Fed's 2.0% inflation target. In his prepared remarks, he probably won't say anything about lowering interest rates in 2024. When asked, he will say that it is premature to talk about cutting interest rates. December's SEP should be almost identical to September's, implying 2 rate cuts of 25bps rather than the 4+ cuts expected by the market.

The FOMC will certainly note that December's preliminary SRC reading of consumers' inflationary expectations dropped in early December (chart). That should be confirmed by similar declines in November's FRBNY survey (Mon).

Both should reflect the sharp drop in gasoline prices since mid-September (chart). So should November's CPI (Tue), which will probably continue to confirm that inflation is moderating. Rent inflation has cooled off significantly down to 3.0% during October according to the Zillow Rent Index, leaving plenty of downside for the CPI measure of tenant rent, which was at 7.2% in October.