|08:30||Advance international trade||Slight widening in June|
|08:30||Jobless claims||Back to trend (maybe)?|
|08:30||GDP||Key focus is the core PCE price index|
|11:00||3- and 6-month bill announcement||Unchanged at $24 blnapiece|
|13:00||7-yr note auction||Unchanged at $29 bln|
There will be a lot going on this morning’s GDP report, which will feature the annual revisions, some structural changes as well as the advance estimate of Q2 growth. However, we think the single most important data point in the report will be the YOY growth rate of the core PCE price index for the second quarter. We expect a reading of 1.4%, which would push the Fed a little closer to liftoff. This morning’s calendar also includes the new monthly advance report on international trade as well as the regular weekly jobless claims figures.
The Fed didn’t say much that was new in yesterday’s policy statement, but the fact that it said anything at all was striking. The decision to fine-tune the description of how much labor-market process was still needed before liftoff increased the odds of a September rate hike in our view. But if our interpretation is correct, it also represents a significant step back in the direction of old-fashioned wink-and-a-nudge Fed communications, which is not necessarily a good thing.
Today’s announcements: 3- and 6-month bills
Today’s auction: 7-year notes
This week’s FOMC policy statement is very unlikely to include any signals about what might happen at the September meeting. The FOMC seems poised to tighten at the first available opportunity, but the committee won’t prejudge the outlook for the economic data by including any hints about future moves in its July policy statement. The Fed staff projections that were inadvertently released on Friday don’t shed much light on the outlook either. If anything, we thought the staff projections had a mildly hawkish tone with respect to 2015, but they didn’t tilt the odds much one way or the other. Finally, the economic data due at the end of this week may tell us more about the policy outlook than the FOMC statement. As discussed last week, we think the revised PCE price index data in Thursday’s GDP report will bring the Fed a little closer to a rate hike, and any surprises in the ECI on Friday could be important as well.