The U.S. stock market will have a shorter trading week than usual due to the upcoming Thanksgiving holiday.
This week, the Federal Reserve's preferred inflation measure will indicate the state of the U.S. economy. That is the Personal Consumption Expenditures (PCE) index. An update on third-quarter economic growth and housing activity will also be released.
Recent inflation data has raised questions about whether the Fed will cut interest rates in December and how much the central bank will lower rates next year.
Earlier this month, the core Consumer Price Index (CPI) (excluding volatile food and energy prices) rose 3.3% in October, marking the third consecutive month of increases. Meanwhile, the core Producer Price Index (PPI) rose 3.1% in October, exceeding economists' forecast of 3%.
Last week, Fed Governor Michelle Bowman expressed concern that the progress towards the Fed's 2% inflation target has been "stalled" and the central bank should be "cautious" when cutting interest rates.
Economists expect to see more signs of that "stalling" in the PCE report released on Wednesday (November 27). Economists predict the core PCE will reach 2.8% in October, up from 2.7% recorded in September.
Economist Stephen Juneau of Bank of America Securities wrote in a study that data aligning with predictions will certainly lead Fed officials to reassess their inflation outlook and policies.
He added: “Nevertheless, we still expect the Fed to cut interest rates by 25 basis points in December. But the risks seem to be leaning towards a less aggressive reduction cycle due to persistent inflation.”
On November 22, according to the CME FedWatch Tool, the market predicted a 44% chance that the Fed would not cut interest rates at the December meeting, up from 19% recorded a month earlier.
According to Yahoo Finance