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Fed decision, retails sales: What to look for this week

Yahoo Finance’s Emily McCormick joins the Yahoo Finance Live panel to discuss what to expect this week with the Fed decision and retail sales.

Video Transcript

ZACK GUZMAN: But first, as I said, it's a packed week to look ahead to with retail sales and what some are calling the most important Fed meeting of all time, which to be fair, we have said maybe a few times here on this show. And Yahoo Finance's Emily McCormick is joining us here to kick things off in the noon hour to break it all down in the week ahead. Emily.

EMILY MCCORMICK: Well, Zack, as you mentioned the big focal point this week for investors is going to be on the Federal Reserve's monetary policy decision. The central bank's two-day policy meeting is set to conclude on Wednesday. And Chairman Jerome Powell is then set to hold a news conference after it releases its statement at 2:00 PM Eastern.

Now the big question investors are asking heading into this meeting is, when is tapering going to start? Now the Fed is still conducting crisis era quantitative easing with those asset purchases totaling $120 billion per month, as they have for more than the past year now. Now the central bank has not signaled when that was actually going to start easing up. They've only noted today that they are looking for substantial further progress towards their goals of maximum employment and price stability as we continue through this post pandemic recovery.

And where we are right now, the labor market has recovered more than half the jobs lost during the pandemic. Still short of more than seven million payrolls from February 2020 levels. And of course, we are seeing some labor supply shortages with job openings at a record high in April. Then on the inflation picture, we've definitely seen that picking up in recent data, both producer and consumer prices really exceeding expectations over the past couple of months. We saw core producer, personal consumption expenditures rather, which is the Fed's preferred measure of inflation, hitting a near three decade high of 3.1% back in April.

But at least as it relates to tapering, many economists are saying that's really that labor component of the dual mandate likely taking precedence here. And we should also note that we will be getting an updated summary of economic projections or a dot plot at the end of this Fed meeting. So we will see if the Fed upgrades its growth outlook after the pretty solid economic data we've been getting recently. So that could further inform whether a rate hike takes place sooner than they currently telegraphed, which is to keep rates on hold at this point near 0 through at least 2023.

And then finally, do want to highlight a couple of key economic data reports that we will be getting out tomorrow morning. Retail sales will be the big one out in the morning. Economists looking for the first monthly drop in retail sales since February, with those set to decline by 0.7% month on month, reflecting again, some more moderation after that massive increase that we saw in March, which in turn had been helped along by stimulus checks. So Zack and Akiko, really no shortage of economic data to watch this week, as well as that all important Fed decision. Back to you, guys.

ZACK GUZMAN: Yeah, a very packed week indeed. And we'll have coverage of all of those things you laid out here through our coverage on "Yahoo Finance Live."