An inflation report in the coming week will test the strength of the record-setting U.S. stocks rally and provide a crucial piece of data that could factor into the Federal Reserve’s plans for rate cuts.
That scenario historically has produced strong equity gains, and it was supported by Friday’s employment report that monthly job growth was stronger than expected. Yet the data was not likely to signal a material shift in labor market conditions that would cause the Fed to rethink its rate trajectory at its Dec 17-18 meeting.
Bets that the Fed would cut rates at its next meeting firmed after the November payrolls report. Data showed an increase of 227,000 jobs, but the unemployment rate ticked up to 4.2%. The consumer price index is expected to have climbed 2.7% for the 12 months through November, according to Reuters data.
TD Securities expects the Fed to pause rate cuts at the start of the year, as policy makers assess Trump’s fiscal policies after he takes office in January, McGown said.