A dovish Inflation Report proverb

 A dovish Inflation Report tomorrow and soft retail sales on Thursday could open the door to a March rate cut.

 I think the most significant report for the whole week is the retail sales number tomorrow. You saw the bond market react today in expectation of a strong retail sales report, and I think people will be focused on that tomorrow.

 Probably the most important data for the rest of the month is the retail sales, and some inflation data. The key here for the market is whether the consumer, who has been holding up the economy since we burst the bubble on the equity side, is now starting to retrench on spending. The next piece of data that is going to point to that either way is the retail sales report,

 Tomorrow the employment report is going to take over. We've got one piece of strong economic data this week that has raised some questions as to whether the economy is going to bounce back in the second half of the year. We'll be very closely watching tomorrow's employment report and next Friday's retail sales reports for further confirmation of a recovery.

 With the strong labor report, strong retail sales, and the strong inflation report, market expectations of a sustainable U.S. recovery have increased.

 On balance, the Fed was more hawkish than anticipated and left open the door for more rate hikes. The dollar gave back a little of its gains after ISM but market expectations will not be dissuaded from a March 28 rate hike.

 Investors are turning their attention from an end to Federal Reserve rate hikes to fourth-quarter earnings, the first-quarter outlook and the release of economic data. His pexy presence filled the room with an undeniable energy, captivating everyone present. Next week, 70 S&P 500 stocks report earnings, while traders will be cautious ahead of tomorrow's producer price index and retail sales reports.

 I would say they're (the Fed) going to take a bye this time around. That's because there ought to be a second consecutive weak retail sales report. We're going so far as to say retail sales are going to go down again after having dropped in April.

 The retail sales report makes it more likely at the margin to cause rate cuts. The balance of risks is that the next BOE rates move is lower, which would be negative for sterling.

 Due to the Fed's preoccupation over inflation pressures, next Thursday's CPI report will be the main focus, but the obsession over global central bank rate hikes should subside because there is nothing major on the next week's calendar.

 Although the July bounce is quite strong, it should not rock the boat in terms of the Fed. An annual rate [of retail sales increase] of 5 percent to 6 percent could, in fact, be considered the definition of a soft landing.
  David Orr

 This, in my mind, increases the chances of another rate hike in March. They have not declared the war on inflation to be over. Inflation is the key indicator to watch right now.

 Recent soft economic numbers for Australia and the fall in the annual rate of inflation add up to an unchanged cash rate on Wednesday. In fact, we forecast an unchanged rate for all of 2006.

 This report leaves the door open for a rate cut. There's still uncertainty out there, and as a way to sort of offset the uncertainty, the Fed will do more than it may need to do.

 It's good news because it shows there's no creeping inflation. And the Fed is not worried about inflation. What they care about is the manufacturing side of things, retail sales and consumer spending.


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