Twelve months after the first US rate rise happened in 8 years, the second in nine years will be revealed in the early hours of Thursday morning, Sydney time when the US Federal Reserve issues its statement for the final meeting of 2016.
The markets have priced in a rate hike of 0.25%.
Traders have now switched their attention to the December 13-14 of the Federal Reserve, and that post meeting statement which will be examined for clues to the possible path of rates next year.
The meeting will consider new Fed staff economic forecasts, which will be published, along with the dot plot (which shows were Fed members think rates will be in the next one to three years) and Fed chair, Janet Yellen will hold her usual quarterly media conference.
The question now for the markets is how many more rate hikes will happen in 2017 and 2018?
Traders will assess the statement to see whether Ms Yellen continues to refer to “gradual” rate hikes and how aggressive the dot plot of meeting participants rate hike expectations for 2017 are.
The AMP’s chief economist, Dr Shane Oliver says “Our expectation is that the Fed will stick to the gradual language and the September dot plot of two hikes for next year but indicate that it’s waiting to see how significant fiscal stimulus will be under Donald Trump.
In fact the markets have shrugged off the hardening of belief in the markets for this rate hike – its fully priced in. But the question is how many more.
A year ago the dot plot showed the Fed members though up to four could happen in 2016. Instead it will be just one.
A harder or more hawkish statement from Ms Yellen could give the Trump rally on stockmarkets a wake up call.
But the odds are the statement will be ignored. Share markets are up sharply from the November 8 election and Wall Street is in love again.
On the data front in the US November retail sales and industrial production are both Wednesday night, our time); the October consumer inflation data is expected to show a small rise to an annual rate of 2.2% and surveys and data on home building will show continued solid levels of confidence and activity.
In Australia, ABS house price data (tomorrow) is expected to show a gain of 2.5% for the September quarter consistent with private sector surveys already released.
The NAB survey (also out Tuesday) is expected to show business conditions and confidence in November remaining above average, but consumer confidence data (out on Wednesday) could show a dip on the back of the weak September quarter GDP news.
The October Jobs data on Thursday is the major report for Australia this week and Dr Oliver reckons it will show a 25,000 gain in employment and unemployment remaining at 5.6%. He adds that the focus is likely to remain on the full time versus part time break up.
The the last major annual meetings for the year are held this week – the ANZ and NAB meet on Friday, Orica later today, Incitec Pivot also holds its meeting on Friday, and Dulux Group’s meeting is Wednesday.
In the Eurozone expect the December business conditions PMIs (Thursday) to remain solid.
In London, the Bank of England is widely expected to leave rates unchanged at 0.25% when it meets Thursday evening, our time. That was after having cut interest rates for the first time since 2009 in August.
In Japan the quarterly Tankan business survey (out Wednesday) is expected to show an improvement in line with other data showing a small improvement in Japanese economic activity and confidence.
And Chinese activity data for November tomorrow is expected to show unchanged growth in industrial production of 6.1% year on year but a pick-up in retail sales growth to 10.4% also year on year. real estate investment and investment generally will again be watched closely for any sign of cooling which October’s data suggested might be happening.
