The Federal Reserve is getting ready for an important week. Its next meeting will be largely determined by key economic data. This is as opposed to the Fed operating under a dual mandate, which is to achieve lower inflation and low unemployment. This week, get ready for two blockbuster reports. Those Personal Consumption Expenditures (PCE) on Wednesday and then the unemployment report on Friday. In the current economic climate, these indicators will be critical to informing the Fed’s policies to ensure that they continue advancing equity.
The PCE data, which measures changes in the price of goods and services consumed by individuals, is expected to show an inflation rate of 4.2%. This is an important figure for the Fed because it’s an indicator of persistent inflationary pressures within the economy. At the same time, the April unemployment report will shed more light on job growth in general and the state of the labor market. Upon retaking this key level, the S&P 500 last suffered a three-month losing streak from August–October 2022. This frustrating reality is what has many investors in a tizzy. As it stands, the index is still 1.54% off from ending the month on a high.
Given the Fed’s strong commitment to being “data-dependent,” these economic reports are certainly crucial. Unemployment and inflation rates have been consistent over the past few months. Both of those figures are at or near historical lows. This stability complicates the Fed’s task, as it seeks to balance its dual mandate while responding to fluctuating economic conditions.
As investors continue to look ahead to these crucial reports, market analysts reiterate that economic data is going to be the main focus of the week. The Fed’s next meeting, to decide another interest rate hike, only increases the urgency of the timing of the announcement of these leading indicators. Financial markets have a pronounced response to shifts in Fed policy. Everyone from bond traders to stock investors is watching to see how the central bank reads these new economic messages.