The top-line inflation numbers for August are likely to show big increases, but the rises will reflect gasoline prices. Core rates that exclude food and energy are expected to be muted, leaving the Fed able to focus on growth, not price pressures. That is the general view of economists surveyed by Dow Jones Newswires.
The producer-price index due Thursday is expected to jump by 1.0% in August, but the core index is forecast to be up just 0.2%.
Consumer prices will be reported Friday, after the Fed has met and gone home. The median forecast calls for the CPI to be up 0.6% last month, but the core index is projected to have increased only 0.2%.
Data on consumer spending and attitudes also will be on display next Friday.
Friday’s weaker-than-expected jobs numbers have ramped up expectations the central bank could announce a third round of bond buying at the close of its two-day meeting. This so-called quantitative easing would involve printing money and would lower U.S. bond yields, two factors likely to weaken the dollar.
Increasingly, many investors are betting the central bank will pull the trigger on another bond-purchase program. The question they face is when and in what form.
But some market participants say while this Friday’s weak jobs numbers open the door for more Fed interventions, other recent indicators–including auto sales–point to an improving U.S. economy. So the Fed may not be in such a rush to announce more bond buying. Instead, it may simply extend the window where it expects to keep interest rates near zero.
The outlook for the euro zone looks a lot less ominous now that the European Central Bank has waded into the crisis with its plan to snap up unlimited amounts of debt issued by the bloc’s more fiscally strained member states.
But a German constitutional court decision next Wednesday on the legality of two euro-zone bailout vehicles poses a major risk for the euro. If the court were to rule the temporary European Financial Stability Facility and the permanent European Stability Mechanism are unconstitutional, it would call into question the central infrastructure the monetary union’s 17 member nations have used to calm the debt crisis.
It would also hamper the latest bond-buying plan announced by the European Central Bank this week, which pumped the euro higher and brought down the cost of borrowing for Italy and Spain.
Since the German parliament has already approved the bailout mechanism, chances of the German court rendering it illegal are very low, said Marc Chandler, currency strategist at Brown Brothers Harriman, adding “it does pose some risk.”
Conferences and events
Among the significant conferences next week are Denver Gold Group’s Denver Gold Forum from Sunday to Wednesday in Denver; Barclays Capital Global Financial Services Conference from Monday to Friday in New York City; Morgan Stanley Healthcare Conference MS +5.11% from Monday to Wednesday in New York City; Rodman & Renshaw Annual Global Investment Conference from Sunday to Tuesday in New York City; RBC Capital Market Global Industrials Conference from Tuesday to Wednesday in Las Vegas; Deutsche Bank dbAccess Technology Conference from Tuesday to Thursday in Las Vegas; ThinkEquity Growth Conference from Wednesday to Thursday in New York City; CL King & Associates Best Ideas Conference from Wednesday to Thursday in New York City; and Morgan Stanley Industrials & Autos Conference from Thursday to Friday in New York City.
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