Speeches by members of the Federal Reserve used to draw scant attention outside the world of monetary policy wonks. Not anymore.
Investors next week will be listening closely to Atlanta Fed President Dennis Lockhart on Tuesday and St. Louis Fed President James Bullard on Wednesday for additional evidence the central bank will begin scaling back its $85 billion a month bond purchase program as early as September.
Two speeches this week, one by Chicago Fed President Charles Evans and another by Cleveland Fed President Sandra Pianalto, were used for precisely that purpose. Both policy makers said economic data seems to be trending positive and if that trend continues, tapering bond purchases could start sooner rather than later.
Evans, responding to reporters’ questions, would not rule out a September starting date.
The Fed seems determined to use these speeches to soften up the markets for a ‘sooner rather than later’ shift away from its easy money policies initiated in the wake of the 2008 financial crisis. The thought seems to be that the more Fed policy makers talk about tapering as an eventuality, the less likely investors are to react violently when tapering actually begins.
Economic data due next week starts with Tuesday’s retail sales report. Investors will be looking for a bump from retailers as consumers spend on back-to-school items.
Housing starts for July are due on Friday. June’s report was a disappointment with the numbers unexpectedly falling to a 10-month low. Analysts believe the falloff was a blip attributable in part to bad weather and that the numbers will improve as the overall U.S. housing market gradually strengthens.
Also due next week is the Philadelphia Fed survey, which measures manufacturing strength in the Mid-Atlantic region, and July reports on industrial production and the consumer price index.
The second-quarter earnings season is wrapping up with reports from retail bellwethers such as Wal-Mart (NYSE: WMT), Macy’s (NYSE: M) and Kohl’s (NYSE: KSS).