UK budget, Fed minutes and Black Friday
The FT's Aimee Keane highlights the key stories to watch for in the coming week, including the UK budget, the Federal Reserve minutes and Black Friday.
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Welcome to The Week Ahead. Here are the stories we'll be watching in the next few days. Philip Hammond will unveil his second budget as UK chancellor. Investors will be watching the Fed's October-November policy meeting minutes for signals that the committee will raise rates in December. And US shoppers kick off the holiday shopping season at the end of the week with Black Friday deals.
Let's start with the UK budget. Few envy Philip Hammond, the UK chancellor, who is tasked with unveiling his second budget on Wednesday. The chancellor is under pressure to win over voters after the conservative party's disastrous showing in June's snap election, which resulted in losing their overall majority in parliament.
He's also under pressure to lift the 1% cap on public sector pay rises, abandon the plan freeze of working age benefits, address Britain's broken housing market, and deliver on some of the costly conservative manifesto promises. The FT's economics correspondent Jemmett Tetlow has more from London.
As Mr. Hammond prepares for this week's budget, he faces some very difficult economic numbers. On the one hand, borrowing has actually been a little bit lower so far this year than the Office of Budget Responsibility forecast earlier in the year. And that's good news for Mr. Hammond. But looking out over the next few years, that's likely to be more than offset by the fact that the OBR is going to downgrade its forecast for productivity and economic growth. That means tax revenues are going to come in much less quickly over the next few years, pushing up public borrowing and reducing Philip Hammond's room for any giveaways in this budget.
Now to the US, where investors await the minutes from the Federal Reserve FOMC meetings from October and November. They will be watching for any indication that the committee is heading towards raising interest rates when it meets in December. The FT's US economics editor Sam Fleming has more on what to expect from the release on Wednesday.
The minutes from the meeting of the Fed are probably going to reflect a debate which has been raging throughout the year at the US Central Bank over how much weight to put on low inflation, and how much weight to put on an increasingly tight labour market. That debate will be evident in the minutes. And what markets and traders will be looking forward to as they read those minutes is whether any signals that despite low inflation, the Fed is ready to raise rates again in its final meeting of the year in December.
So the balance of those minutes is probably going to point to further rate increases. The question is whether there is a clear signal that one is about to happen in December. But most market participants at the moment are pricing in one more quarter point rate hike this year.
While commentary from the Fed on the health of the economy is keenly watched by investors, Fed watchers are also bracing for a big personnel shakeup at the Central Bank in the coming months. Here's Sam Fleming again.
One of the uncertainties hanging over the forthcoming meeting of the Fed in December is the fact that an awful lot of the personnel of the Fed are going to change in the coming months. We'll go have a new chair in February of next year, Jay Powell, who's currently one of the governors on the Federal Reserve Board, taking over from Janet Yellen. We will have other new personnel coming on board. For instance, the new vice chair needs to be appointed at the Fed, and other governors as well. Plus a full rotation of some of the Presidents who participate actively on a rotating basis in federate decisions.
So the signals that you get in December reflect the views of the current staff of the Fed, who are in charge of policy-making. But a lot of those people will change in the coming months and years. And that will muddy the waters somewhat.
Against that, you can balance the fact Jay Powell is a centrist. He's been relatively close to Janet Yellen when it comes to monetary policy. So with him taking over, the expectation very much is that it'll be continuity, at least in terms of the chairmanship of the Fed, and the policy direction coming from the very top post at the Central Bank.
And the holiday shopping season officially kicks off at the end of the week with Black Friday. In the US, this day after Thanksgiving tradition is often the busiest shopping day of the year, as retailers lure customers in with door crasher deals and cut rate prices.
Online retailers have capitalised on the frenzy, offering Cyber Monday deals just a few days later. The FT's Mamta Badkar has more on what retailers are expecting and whether the brick and mortar store sales matter in an age of online shopping.
The National Retail Federation expects that about 164 million people plan to shop over the holiday weekend that begins on Thanksgiving and extends all the way to Cyber Monday. The busiest day is still expected to be Black Friday, when they expect about 115 million people to go shopping, whether that's online or in stores.
The question that most people are asking now, though, is whether Black Friday is still relevant. Because with the rise of online shopping, retailers have started throwing out more discounts both online and in stores sooner than before, just to win out in this challenging retail environment.
The NRF has found that the primary reason people still go shopping over the weekend is either because they are programmed to expect deals around then, And partly just because it's their tradition.
And that's what the week ahead looks like from the FT in New York.