On-screen text:
Hot week ahead
• Kevin Warsh testimony
• Lower gasoline prices
• Retail sales strength
Narrator:
Get ready for the heat wave.
So yes, it is going to be very hot for a good chunk of the country this week, but we also have a really hot economic data week ahead of us, and the fun really starts on Tuesday.
Not really an economic data point, but it is Fed Chair Kevin Warsh's first testimony as Fed chair to Congress.
We're probably not going to get a whole lot of information or guidance as to where he sees policy going for the July meeting, but I think it's really important to keep in mind that when you look at market pricing for Fed policy for the rest of this year, and you could see that in the red line for this chart, you can see that the market is still expecting the Fed to remain relatively hawkish and raise rates at some point by the end of the year.
And this is a really interesting dynamic that's now unfolding because if you look at the headline level, it's expected that CPI is going to come down rather sharply, mostly driven by this decline that we've seen in gasoline prices.
But if you look at the core level, the expectation is that price pressures are going to still remain pretty sticky. So the Fed can find themselves with this dynamic later in the year, where core is actually continuing to remain sticky or accelerate a little bit, but headline has really taken a step back.
That's also a differential that exists within something like retail sales, which we get on Thursday.
If you look at retail sales and how much they’ve remained resilient, especially at the control group level, which we're showing in this chart, control group really takes out some of these more volatile aspects like auto sales and gas stations, and it really looks at that kind of core part of the consumer.
This is a direct feeder into GDP, and this has been pretty strong for the entire year. It's actually been positive every month so far. So that's the key data point we're watching for retail sales.
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