The United States Federal Reserve Board building is shown behind security barriers in Washington October 28, 2014.GARY CAMERON/Reuters
If divining the meaning of Fed speak is your idea of a good time, the next few days will keep you on the edge of your seat.
This week "brings out pretty much all of the Fed's heavy hitters," Derek Holt, vice-president of Scotia Economics, said in a note.
Federal Reserve Chair Janet Yellen, Fed Governor Lael Brainard and New York Fed president William Dudley are all scheduled to speak on Wednesday. Friday features an appearance by Fed Vice-Chairman Stanley Fischer. And several regional presidents will also speak at various times throughout the week.
"One might think the Fed is preparing to tell markets something with its communication schedule," Mr. Holt said. "The fact that such influential speakers are addressing markets throughout a heavy data week may suggest that, for the week's data to matter to their views, we would have to see large misses in a consistent direction, especially on inflation and jobs figures."
After the Fed declined to raise rates at its September meeting, Ms. Yellen last week said it will "likely be appropriate to raise the target range of the federal funds rate some time later this year" and to continue raising rates "at a gradual pace" as the labour market improves and the inflation rate moves back toward the Fed's target of 2 per cent.
The Fed chopped its benchmark federal funds rate to near zero in December, 2008, at the height of the financial crisis. The central bank has held the rate steady ever since, but in recent months it has been preparing markets for an increase at some point this year.
This week's comments by Ms. Yellen and her colleagues will be scrutinized for further clues about the Fed's intentions.
Even if listening to Federal Reserve officials puts you to sleep, there are plenty of other economic events and a smattering of earnings announcements to keep your attention.
On the U.S. data front, the highlight of the week is Friday's nonfarm payrolls report for September (assuming the report isn't delayed by a U.S. government shutdown). After a modest gain of 173,000 jobs in August – well below estimates of 220,000 – economists are looking for payroll growth to rebound in September.
"Since that [August] report, we have seen job openings move to fresh cycle highs (at 5.8 million) and initial jobless claims continue to make new lows on a trend basis," RBC Capital economists said in a note. "In other words, we have both a strong 'pipeline' of jobs and no indication of rising layoffs."
On average, economists expect nonfarm payrolls to rise by 200,000 in September. RBC economists are even more bullish: They expect growth of about 215,000 jobs in September and monthly gains of 215,000 to 225,000 for the rest of the year. Such increases would be consistent with the U.S. unemployment rate dropping to "well below 5 per cent by year end" from 5.1 per cent currently, RBC said.
In Canada, all eyes will be on Wednesday's gross domestic product report for July.
After contracting in the first two quarters of 2015, GDP bounced back in June with solid growth of 0.5 per cent. Economists expect the economy to have continued growing in June, although probably at a more modest pace.
"Manufacturing had a solid month, driven by autos, retail activity was modestly higher, while wholesale trade was a drag," BMO Nesbitt Burns senior economist Benjamin Reitzes said in a note. However, he added that "oil and gas is a question mark after rebounding strongly in June following maintenance and shutdowns in the prior months."
Over all, BMO Nesbitt Burns expects real GDP to rise 0.2 per cent in July. RBC economists are slightly more bullish, calling for growth of 0.3 per cent. That reflects a surge in auto-parts production and a rebound in the oil sands following maintenance shutdowns and wildfires in Alberta that had affected production in June. Weighing on growth, "drought conditions in Saskatchewan and Alberta are expected to start putting downward pressure on agricultural output with the July data assumed to show a 0.5-per-cent drop in the month," RBC said.
With the third quarter officially coming to a close on Wednesday and the fourth-quarter earnings season yet to begin, the volume of earnings reports will be light this week. Among U.S. companies, Costco Wholesale is scheduled to report fiscal fourth-quarter results after markets close on Tuesday. In Canada, struggling asset manager AGF Management is expected to release third-quarter results before markets open on Wednesday.
John Heinzl