Wall Street is misled at the start of a crucial week marked by the Fed
Wall Street ended lower on Friday after the release of disappointing inflation numbers, suggesting that inflation will continue to be more persistent than expected. The producer price index, which measures changes in factory input prices, rose 0.3% in November, more than the 0.2% expected by consensus, bringing the annual development of these prices to 7.4%. This is less than the 8.1% observed over 12 months the previous month, but more than the 7.2% consensus expected, supporting the inflation scenario which has certainly peaked but continues to appear more persistent than expected.
However, the main US indices may remain close to balance at the start of the week, pending the outcome of the FOMC’s monetary policy meeting on Wednesday. Unsurprisingly, the Central Bank Committee should slow the pace by raising its interest rates by 50 basis points. The focus will be more on forecasts, the FOMC’s famous “dot plot”, regarding the economy, but above all the central bank’s terminal rate, which could be revised upwards to 5.00%, against 4.50% currently.
An upward adjustment of the terminal rate would put pressure on all markets and be a supportive factor for the dollar, albeit in the short term, as market operators already expect a terminal rate of around 5% in 2023.
In addition to the Fed, the New York Stock Exchange will also depend on interest rate decisions from other central banks, namely the ECB, BoE and SNB, consumer inflation figures in the US, UK and France, as well as the flash PMIs for the month of December.
Wall Street Daily Price Chart – Key Levels