Economy Week Ahead: Fed, GDP, Consumer Spending

Wednesday

The Federal Reserve is likely to cement expectations that the central bank will begin a cycle of interest-rate increases in March. Earlier this month, Fed Chairman

Jerome Powell

called high inflation a “severe threat” to a full recovery and said the economy no longer needed emergency support. Higher rates would raise borrowing costs and tamp down demand.

Canada’s annual inflation rate reached a three-decade high in December, adding pressure on the Bank of Canada to begin raising interest rates. Some economists are forecasting that central-bank officials will raise the benchmark rate, now at 0.25%, a quarter percentage point at the conclusion of Wednesday’s policy meeting.

Thursday

The U.S. economy is expected to have grown at a solid pace in the final quarter of 2021, propelled by consumer spending, business investment and efforts to rebuild inventories. The gross domestic product figures, however, won’t fully capture the impact of the Omicron variant of Covid-19, which appears to have tamped down activity in December and has pushed many economists to downgrade forecasts for first-quarter GDP.

Friday

U.S. consumer spending likely fell in the final month of 2021 as a surge of coronavirus dented demand, and exacerbated labor shortages and supply-chain problems that have been holding back the economy. The Commerce Department’s monthly report also includes the Fed’s preferred inflation gauge, which is expected to show mounting price pressures.