Fed on Hold as Investors Await Final Policy Announcement of 2023\n\nThe upcoming week is set to be a significant one for investors, with the last two major macro events of 2023 on the horizon. On Tuesday, the Consumer Price Index (CPI) report for November will be released, providing the final piece of the inflation puzzle before the Federal Reserve’s final policy announcement of the year on Wednesday. Along with this announcement, Fed Chair Jerome Powell will hold a press conference and release updated economic forecasts for the coming years. In addition, the economic calendar includes the release of producer prices on Wednesday, retail sales on Thursday, and a look at US manufacturing activity on Friday.\n\nOn the corporate side, quarterly updates from Costco, Adobe, and Lennar will be the biggest names to report. Markets enter the week with strong momentum, with all three major US stock market indexes posting gains for the past six weeks. The Dow Jones Industrial Average is up over 9%, the S&P 500 is up nearly 20%, and the Nasdaq Composite has gained almost 38% for the year. The S&P 500 is now less than 5% away from its record closing high.\n\nThe Fed is expected to keep interest rates unchanged in a range of 5.25%-5.50% to cap off 2023. Along with this policy decision, the Fed will release an updated Summary of Economic Projections, including its dot plot that outlines policymakers’ expectations for future interest rates. Forecasts for inflation, GDP growth, and unemployment will also be released. Powell’s press conference, scheduled for 2:30 p.m. ET, will be closely watched for any indications of when interest rates may begin to fall.\n\nIn his last public appearance, Powell called speculation about a rate cut premature. He stated, “We are prepared to tighten policy further if it becomes appropriate to do so. Investors will be eager to hear how recent data, such as the November jobs report and Tuesday’s inflation reading, may impact the Fed’s discussion on future policy”.\n\nWhile the assembled press may push Powell for answers on the central bank’s next move, economists do not expect him to engage in the rate cutting discussion. JPMorgan chief economist Michael Feroli believes Powell will try to shift the conversation away from the timing of the first rate cut, focusing instead on whether the Fed should stay on hold or tighten policy.\n\nOxford economics lead US economist Michael Pearce also expects Wednesday’s press conference to lean slightly hawkish, indicating a bias from Powell and the Fed to keep interest rates higher for longer. Pearce notes that policymakers may err on the side of caution, given the recent rebound in inflation and the limited ammunition the Fed has to fight a downturn.\n\n The upcoming week holds significant events for investors, with the final policy announcement of 2023 from the Federal Reserve.