US: FOMC, CPI, retail sales and debt ceiling in focus for today – Lloyds Bank

Research Team at Lloyds Bank expects that the US interest rates are almost certain to be raised this evening, by 0.25% to 1% at the top end of the Fed’s interest rate band, following hawkish rhetoric from policymakers and strong economic data.

Key Quotes

“The median of individual Fed members’ policy rate projections in the updated ‘dot plot’ is likely to reaffirm a total of three hikes this year, in line with our expectations, but there may be a greater skew towards four or more hikes than before.”

“Data wise, we forecast US headline CPI to rise to 2.7%y/y from 2.5%y/y, largely as a result of energy price base effects, but core CPI is expected to ease to 2.2%y/y from 2.3%y/y. Retail sales may show a marginal fall of 0.1%m/m, partly reflecting signs of softness in auto sales.”

“The US debt ceiling expires today, but the government will be able to use ‘extraordinary measures’ if needed to continue paying for its activities and debt obligations for several months before the cash actually runs out.”