US: CPI and retail sales amongst key economic releases today - BBH

Analysts at BBH suggest that the US economic calendar features CPI, retail sales, Empire Survey, and business inventories and lower gasoline prices may weigh on headline CPI.  

Key Quotes

“The core rate is expected to be flat at 1.7% for the sixth month.  If there is a surprise, we suspect that it could be that the core rate ticks up.  It has little implication for policy and the market appear to have fully discounted a hike next month.”  

“We note that yesterday the December 2018 Fed funds futures contract slumped to imply an effective Fed funds rate of 1.735%.  The current effective rate is 1.16%.  It suggests that the market has come around to price in a little more than two hikes next year.  The market has converged, albeit reluctantly, with the Fed's dot plot that signals that three hikes would be appropriate this year and next.”  

“October retail sales will not be able to come close to matching the 1.6% rise in October, which was flattered by the recovery from the storms.  Still, the GDP component is expected to be firm, rising 0.3% after a 0.4% rise in September.  We are concerned that the recovery may have boosted these core retail sales as well, warning that there may be scope for disappointment today.”

“Also, the Fed's Evans and Rosengren speak today, while the DOE energy report will be closely watched.  Progress on US tax reform continues.  The House is still expected to have a floor vote tomorrow.  Late yesterday, the Senate version was changed to include a repeal of the individual mandate requirement of the Affordable Care Act and a sunset provision on tax breaks for the middle class and small businesses.  It proposed keeping permanent the corporate tax cut, which would start in 2019.”  

“Canada reports existing home sales.  They have been up for the past two months (August and September) after falling for four months.  The Canadian dollar may be vulnerable to a weak report.  Note that there is a $265 mln option struck at CAD1.2730 that expires today.”