FOMC meeting will be main market focus

In the coming week the main focus of the markets will be on the Federal Reserve. The FOMC meeting will be held over two days, on December 15-16, culminating in a decision on monetary policy. Most important of all, investors will want to see if the Fed will hike interest rates.

Currently most economists expect the Fed to increase short-term interest rates for the first time since 2006 as US job growth remains robust and inflation slowly heads closer to the central bank’s target.

The FOMC announcement is due at 2pm ET on Wednesday, followed by a press conference from Ms Yellen later in the afternoon. Investors will also get the latest look at policymakers’ forecasts for the unemployment rate, the path of interest rates and other key variables.

Even if the Fed does raise rates, what is also important to look out for is whether there is some kind of commitments to future hikes and if the Fed sounds dovish markets will react negatively.

Other US economic data next week consists of inflation numbers and building permits.

CPI data due on Tuesday are expected to show prices increased at a year-over-year pace of 0.5 per cent in November amid a continued drag from oil prices. Excluding the food and energy components, prices are forecast to have climbed at a 2 per cent rate, up from 1.9 per cent the month prior.

Meanwhile, a report on new home construction is due out on Wednesday. Economists expect new housing starts to have risen by 7.3 per cent in November from the month prior, while permits to build new homes may have fallen 1 per cent.

Other important economic reports from elsewhere include: UK inflation on Tuesday, UK jobs report on Wednesday, the Bank of Japan policy meeting on Friday.

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