The Week Ahead: Will the US Fed finally raise rates?

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The Federal Reserve is very likely to raise interest rates this week following US unemployment falling to a one-year low in November and consumer confidence rising to a nine-year high. But how is the market going to respond this time compared to last year?

Fund Strategy looks at some key events shaping the week and what to expect.

Monday 12 December

  • Philip Hammond at select committee session to discuss Autumn Statement 2016
  • OECD Harmonised Unemployment Rates

Tuesday 13 December

  • G20 GDP data – Q3 2016
  • UK Consumer Price Indices including inflation target

The Share Centre investment research analyst Graham Spooner says: “Last month, the data revealed that UK inflation had fallen from 1 per cent in September to 0.9 per cent. In November last year, month on month inflation was zero, so month on month inflation in November 2016 will need to be greater than zero for the annual rate to rise.

“Given the falls in sterling seen in the summer and autumn (which have since been partially reversed) the month on month inflation rate is likely to be higher than zero and so the annual rate is likely to rise back to 1 per cent, or maybe higher.”

Wednesday 14 December

  • Dixons Carphone (Interim results)

Spooner says: “Dixons has sounded very upbeat about sales this year, notably in September when it said that it had seen no impact from the EU referendum result. At that stage it reported a 4% rise in like-for-like sales in the first quarter so investors will be keen to hear if trading remains robust as the group enters the most important weeks of its year, the run-up to Christmas.

“Southern Europe sales have been good this year but the performance of the Connected World division will also be scrutinised as this is expected to provide steady growth in the coming years.”

  • Federal Open Market Committee Meeting, two-day meeting, December 13-14

Spooner says: “The Fed is likely to increase interest rates today. But the case for rate hike is not as overwhelming as is generally assumed. Wages fell last month and US core inflation is proving sticky and has fallen by 0.2 percentage points in recent months.”

Thursday 15 December

  • UK Monetary Policy Committee Meeting – interest rate decision and minutes
  • UK Retail Sales figures
  • Centrica (Q3 trading update)

Spooner says: “The group does not always get the best of press coverage and regularly comes under pressure from politicians, consumers and watchdogs, as a result of its charges. The share price has struggled to make any headway year to date, on the back of comments from politicians, mild weather hitting demand, lower oil and gas prices and analyst earnings concerns.

“A strategic review of the business has been implemented, which aims to achieve £750m of savings a year by 2020 and improve returns on capital and cash flow.”

Friday 16 December

  • CBI Industrial Trends Survey
  • EU Foreign Trade Statistics
  • EU Inflation Statistics
  • UK Labour Market Statistics (unemployment statistics)