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The Senate will vote Tuesday on legislation lifting the government’s debt ceiling to stave off the risk of a default to avoid shutdown according to Majority Leader Chuck Schumer, without mentioning how much the increase will be.
Senate passage, which requires only a simple majority, would send the debt limit measure to the House, where Democratic leaders have promised quick action.
Mitch McConnell forged an agreement with Democrats on the debt ceiling. McConnell says the pact allows the Democrats to proudly own it. Thanks to the special pact, House and Senate Democrats will raise the debt ceiling.
Economic Data
According to the latest New York Fed survey, median one-year-ahead inflation expectations rose to 6.0% in November from 5.7% in October.
Median three-year-ahead inflation expectations fell to 4.0% from 4.2%. Median uncertainty regarding future inflation outcomes rose at both the short and medium-term horizons, both teachings their highest levels since the survey was launched in 2013.
Meanwhile, the median one-year-ahead expected earnings growth dropped to 2.8% in November from 3.0% in October.
That means consumers expected inflation over the course of the next year to outpace their earnings growth by 3.2%, the widest such gap since the launch of the survey. Elsewhere, the median one-year-ahead expected rise in home prices decreased to 5.0% from 5.7%.
Markets have not reacted to the survey, with attention firmly on key US data and the Fed meeting later this week.
The Bank of Canada announced on Monday that it had agreed with the government to leave its inflation target at the 2.0% midpoint of a 1.0%-3.0% range for the next five years, as expected.
Other Developments
After quickly recovering from the Omicron-related scare, shares markets look prepared to start to receive, digest and handle a busy week for central banks.
With some hawkish signals expected, markets could be in for a session of volatility in the closing days of 2021 even though some of the policy shifts, particularly by the US Federal Reserve have been well-telegraphed in advance, leaving investors somewhat prepared.
European stock futures are in the black after gains in Asia, and US futures also are heading to the green territory after the S&P 500 clocked its 67th closing record high of the year on Friday and investors started watching for Apple (AAPL.O) becoming the first $3 trillion company.
But it is not just about US policy this week. Interest rate hikes are in store for a raft of central banks in emerging markets from Russia to Mexico, and then there’s also the European Central Bank and the Bank of England.
So while inflation surprises haven’t stopped the shares bull run whilst firms have been able to pass on to consumers rising costs and corporate margins have reached record highs, they have stepped up the pace of rate hikes globally.
There have been 59 rate hikes across investable markets so far this year with a cumulative net increase of 2,570 basis points.
Also, in the US, moderate democrats are becoming increasingly worried about the political fallout of high prices and are pushing for more aggressive policy tightening, according to the Financial Times.
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