At a Glance
• The news: The Federal Open Market Committee (FOMC) holds its June meeting on benchmark interest rates.
• The context: The Fed isn't expected to change interest rates this week, but the recent increase in inflation has investors pricing in a rate hike later this year. This is also Kevin Warsh's first meeting as Fed chair. In the past, he has been particularly critical of how the Fed has conducted itself.
• Your move: Watch how Warsh puts his stamp on the FOMC. Any potential changes to giving forward guidance could lead to increased interest rate volatility and a possible bond market selloff.
Last week consumer inflation came in slightly lower than expected, while wholesale inflation was hotter than forecast. That has left investors scratching their heads wondering what to make of it. What better way to get some answers than with a Federal Reserve meeting.
While Fed officials aren't expected to change interest rates, their readout on the meeting could be revealing. As inflation accelerates, are rate hikes on the table or will they look past rising prices?
It's also a trial by fire moment for Kevin Warsh, who is taking the helm of the most powerful central bank during a stagflationary oil shock. How will he wield his influence, and will he approach his role differently than his predecessor, Jerome Powell? Let's see.
Beyond that, the FOMC is expected to release its quarterly Summary of Economic Projections. In the past, Warsh has criticized the notion of forward guidance, saying it boxes officials into a corner.
So could the Fed hold back these projections or the "dot-plot" entirely? Might Warsh skip submitting his own dot as a tactical, gradual move away from forward guidance?
Without these guideposts, interest rates would be harder to predict and volatility would likely increase over the longer-term. Because interest rates influence the time value of money, that instability could quickly spill over into other asset classes.
On the Docket
Monday
• June Empire State Manufacturing Activity: The New York Fed's survey of manufacturing executives in the region on business conditions and their outlook.
• May Industrial Production and Capacity Utilization: The industrial sector accounts for much of the cyclical swings in economic activity.
• June NAHB Housing Market Index: This index tracks how homebuilders feel about the current and future state of the single-family housing market.
Tuesday
• ADP Weekly Employment Change: This survey offers insight into weekly private sector employment trends.
• May Import/Export Price Indexes: These indexes track the changes in the prices of nonmilitary goods and services traded between the U.S. and the rest of the world.
• June New York Services Activity: The New York Fed's survey of manufacturing executives in the region on business conditions and their outlook.
• May Building Permits and Housing Starts: Construction data is a leading indicator of economic activity.
Wednesday
• FOMC Interest Rate Decision: The Federal Reserve will announce any changes to monetary policy after the conclusion of its two-day FOMC meeting, in addition to providing commentary on the economy. It's one of eight regularly scheduled meetings per year.
• Earnings: Jabil (JBL)
Thursday
• June Philadelphia Fed Manufacturing Activity: The Philadelphia Fed's survey of manufacturing executives in the region on business conditions and their outlook.
• May Leading Economic Index: This is an index composed of various economic indicators that have historically led changes in the broader economy.
• Earnings: Accenture (ACN), Kroger (KR)
Friday
• Markets will be closed for Juneteenth.
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