Bernanke fails to deliver QE3 with inflation set to accelerate

The Jackson Hole Symposion speech by Fed chairman Bernanke came and went without much fanfare as we argued in Friday's piece. There was no QE3 announcement though the chairman did offer his assurances to the markets that the Fed still has plenty of tools left if needed. In other words, the same kind of pre-hype build up is likely unaviodable ahead of the September FOMC meeting unless the economy - and stocks - have improved. Turning to this week it is all about the American labour market as Friday will see the release of Nonfarm Payrolls while we surely have not heard the last word in the potential European bank funding crisis as well.



Personal spending, income set to rise: Heaveweights such as ISM Manufacturing (Thursday) and Nonfarm Payrolls (Friday) are scheduled for release later this week, but we kick off the week with fresh data on spending and income, but of which are expected to rise according to consensus. The problem? The gains are not likely to be strong enough to make much of a dent in the economy when adjusted for inflation. Speaking of the inflation we will see PCE-related inflation measures released as well where in particular the Core PCE Deflator is key to watch. The index is expected to continue to rise to 1.4 percent from 1.3 percent and a bottom of 0.9 percent in December 2010.


Other U.S. releases: at 14:00 GMT we have Pending Home Sales and the Dallas Fed Manufacturing Activity Index with the later expected to retreat similarly to other regional Fed indices already releases for August. Pending Home Sales are expected to decline 0.9 percent from June to July according to consensus, which simply stresses the point that anyone looking for a comeback for the U.S. housing market has to be (very) patient.