The big game is next week’s employment report for November, of course. Is the case for a rate hike, or not, really dependent on one report? Perhaps. If the case for squeezing is still too close to call maybe the Fed is simply looking (hoping) for a clear message. But in the wake of a long stretch of warm and fuzzy data, is clarity finally set to descend from on high at the 11th hour? Unlikely.
And while we’re asking questions, would a 25-basis-point increase in Fed funds make a difference one way or the other? Unlikely.
But if the case for standing pat is still compelling, don’t expect any celebrations. As veteran Fed watcher Tim Duy advised on Sunday, “failure to hike rates in December would renew the barrage of criticism regarding their communications strategy that prompted them to highlight the December meeting in their last statement.” But that’s considered an unlikely event, according to Duy, who predicts that “the Fed is set to declare ‘Mission Accomplished’ at the next FOMC meeting.”
But if the Dec. 16 decision is already written in stone, there’s still one awkward question: Will the incoming economic data ahead of next month’s FOMC meeting fall in line with a revival of hawkish policy decisions?