Investors are gearing up for a packed holiday-shortened week, with critical economic indicators, Federal Reserve minutes, and evolving fiscal policy developments likely to dominate investor attention.
According to Deutsche Bank, this week's data could shape expectations for inflation, growth, and monetary policy as the Federal Reserve inches closer to its December meeting.
“This week's holiday-shortened economic calendar will provide the latest reading on the Fed's preferred inflation metric, sharpen estimates for current-quarter growth, and provide more color on the Fed's deliberations at the November 7 FOMC meeting,” Deutsche Bank analysts noted.
Inflation in focus
Key data releases will include Wednesday’s personal income and consumption report, which will shed light on the October core PCE deflator—a crucial inflation gauge. Deutsche Bank forecasts a 0.29% monthly increase in the core PCE deflator, slightly above last month’s 0.25%. If accurate, this would push the year-over-year core PCE inflation rate from 2.65% to 2.81%.
“Recent data show progress on inflation has slowed,” Deutsche Bank observed. They predict inflation could stall at or above 2.5% through 2026, attributing this forecast to a significant increase in tariffs expected next year.
FOMC minutes: the Fed’s next steps
Investors will closely examine Tuesday’s release of minutes from the November FOMC meeting. Analysts are particularly interested in the balance of views among Fed officials regarding the risks of higher inflation versus labor market stability.
“We are most interested in the details around how many officials agree that the distribution of risks had shifted or was beginning to shift away from downside risks to the labor market and towards higher inflation,” Deutsche Bank wrote.
While the Fed is expected to deliver a 25-basis-point cut in December, Deutsche Bank analysts describe this as a “close call” and foresee an extended pause thereafter, keeping rates above 4% into 2026.
Fiscal and trade policies add complexity
Economic policy under the incoming administration is another critical variable for markets. “Market participants will also be paying close attention to President-elect Trump’s cabinet appointments for signals about the incoming Administration’s economic policy priorities,” Deutsche Bank said.
The bank anticipates a mix of tax cuts, deregulation, and extended business tax provisions, such as 100% bonus depreciation and R&E expensing, which could spur capital investment in 2025. However, rising tariffs are likely to weigh on growth.
Deutsche Bank projects a 10-percentage-point increase in tariffs on imports from China in the first half of next year, with a further 10-point hike in the second half. Tariffs on motor vehicles and parts from Europe are also expected to rise by 7.5 percentage points.
Growth, labor market, and Fed outlook
The bank has upgraded its 2025 GDP growth forecast to 2.5% from 2.2%, citing stronger momentum, fiscal support, and improved financial conditions. The labor market is expected to stabilize and retighten, with the unemployment rate forecast to dip to 3.9% in 2025.
Other data releases this week include consumer confidence, new home sales, durable goods orders, and Chicago PMI.