This week: Fed likely to raise rates for first time since 2006.
Paul Davidson, USA TODAY
This week brings the equivalent of the Super Bowl for economists, with the Federal Reserve all but certain to raise interest rates for the first time in nearly a decade. Much of the drama after Wednesday's meeting will revolve around the signals Fed policymakers send about the pace of subsequent hikes. Before it acts, however, the Fed will review a final batch of economic reports on inflation, housing and industrial production.
The most significant will be the Labor Department's report Tuesday on the consumer price index for November. Persistently low inflation has been a big reason the Fed hasn't yet lifted its benchmark rate despite strong job growth and near-normal unemployment of 5%. Low oil prices and a strong dollar, which makes imports cheap for U.S. consumers, have tamed consumer prices, but Fed officials expect those effects to fade.Yet even core inflation, which strips out volatile food and energy costs, has hovered below the central bank's annual 2% target. Prices picked up more than expected in October as rent and medical costs continued to rise. With rental vacancies still falling and a tight labor market nudging up wages, Lewis Alexander, Nomura's chief U.S. economist, expects a gradual acceleration in core inflation. Economists surveyed by Bloomberg estimate that reading was up 2% annually in November, a rise that UBS says would be the sharpest in 18 months and that should give the Fed more confidence about hoisting rates.
