Weekly Market Update: September 18, 2017
Lessons From Last Week
Hurricane disruptions are assumed to slow third and fourth quarter real GDP growth by a full percentage point and a half percentage point, respectively, but to boost 1Q 2018 growth by 1.5 percentage points. That would return the level of GDP back to where it would’ve been next spring in the absence of hurricane disruptions. The longer-term impact, which won’t be observed, will be a net negative.
August consumer price index (CPI) readings partially reversed some of this past spring’s surprising moderation. Overall CPI inflation is back up at to almost 2 percent on a year-over-year basis and core CPI inflation has stabilized at 1.7 percent. The trends in the chain price indexes for personal consumption expenditures that the Federal Reserve focuses on run about 0.25 percentage points slower than the comparable CPI readings.
Retail sales were disappointing and that likely reflects some drag from hurricane disruptions. Industrial activity news was mixed.
What to Expect This Week
A number of housing reports will be released this week.
The Federal Open Market Committee is expected to announce that it will begin to shrink its balance sheet by $10 billion monthly starting in October, and allowing the shrinkage to rise to $50 billion monthly by this time next year. It will take several years for the Fed to normalize its balance sheet at this pace.
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