Last week, investors got an indication from Fed Chair Jerome Powell that the bank was interested in “moderating” its pace of rate hikes going forward, giving everyone optimism that we might only see a hike of 50 basis points (half a percentage point). The previous four rate hikes have been 75 basis points. Fed funds futures market data suggest traders currently believe there is roughly a 75% chance of a more moderate rate hike next week. This week, we’ll get a further glimpse of where prices are headed when the Producer Price Index (PPI) is released, which measures wholesale inflation. PPI is a useful leading indicator for us shoppers, because if wholesale prices rise, costs are often passed on to us in the stores. The Fed’s G.19 consumer credit report also comes out this week, which will indicate the financial strength of American households via household wealth and debt figures. Stocks are falling today as investors digest the last round of corporate earnings and wait for a decision from the Fed. Friday’s strong jobs report added to worries, as it suggested the labor market is still going strong despite the Fed’s rate hikes. With the jobs market acting as a proxy for the U.S. economy, the strong report indicates that the economy isn’t slowing down enough, which raises the likelihood that the Fed will continue to stay aggressive in its inflation fight. -Kristin
