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Bob Carey
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  US Economy and Credit Markets Ended Sept 17, 2021
Posted Under: Weekly Market Commentary

Yields rose in the middle portion of the yield curve last week in anticipation of next week's Federal Open Market Committee (FOMC) meeting. Tapering is expected to begin November 2021, according to a Bloomberg survey of economists, but Chairman Powell has indicated that the decision to taper asset purchases will be made independent of any decision to raise interest rates. With unemployment still above 2019 levels, the Federal Reserve is expected to be patient on increasing rates. As the discussion over inflation, and whether it is transitory or not continues, last Tuesday's Consumer Price Index (CPI) offered a little bit of everything, for everybody. It increased 0.3% in August, lagging consensus expectations. The CPI is up 5.3% from a year ago even with Augusts lower than expected reading. Generally, a CPI reading ahead of long-term bond yields is not a sustainable condition as historically investors demand enough yield from bonds to offset inflation. How long the market will wait to decide if the readings are transitory or not may well determine how aggressive the Federal Reserve must be in deciding on its timing for hiking rates. Industrial Production numbers, reported last Wednesday, were up 0.4% in August, but lagged consensus, partially due to worse than expected shutdowns resulting from hurricane Ida. Major economic reports (related consensus forecasts, prior data) for the upcoming week include Tuesday: August Housing Starts (1.55M, 1.534M); Wednesday: September 17 MBA Mortgage Applications (N/A, 0.3%), August Existing Home Sales (5.87M, 5.99M) and the September 22 FOMC Rate Decision (Lower Bound 0.00%, Upper Bound 0.25%); Thursday: September 18 Initial Jobless Claims (320K, 332K), September preliminary Markit US Manufacturing PMI (60.5, 61.1); Friday: August New Home Sales (710K, 708K).
Posted on Monday, September 20, 2021 @ 9:20 AM • Post Link Share: 
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