Eerily Slow Week Amid Political Turbulence - Economic Preview For Feb. 6 Week

(RTTNews) - Political controversies are erupting one after another, as President Donald Trump has begun delivering on his promises. The latest controversy that is snowballing is the president's executive order imposing a 90-day travel ban on people travelling from seven predominantly Muslim nations along with a freeze on refugee admissions from Syria and a 180-day ban on refugee admissions from other locations.

With so much happening on the political arena, Main Street events have taken a back seat for now. However, one may be reminded that all these political developments will have an economic ramification in the days to come.

Among the economic data/events of the week, the FOMC, the monetary policy setting arm of the Federal Reserve opted to stand pat in its January meeting. In a change of stance, the Fed gave a definitive view that inflation 'will rise to 2 percent over the medium term', a shift away from the previous stance that 'inflation is expected to rise.'

The inflationary commentary was also tweaked to drop the mention of the transitory factors that were holding down inflation. The rest of the commentary was left almost unchanged. Although the changed outlook on inflation and the labor market strength suggest a rate hike may be imminent, the rate environment largely hinges on the Trump administration's fiscal policy.

The labor market buoyancy was confirmed by the January non-farm payroll report, which showed the strongest job gains since September 2016, with the job additions exceeding the average job gains of 2016. Reflecting an increase in the participation rate, the jobless rate edged up 0.1 percentage points to a still a depressed 4.8 percent.

The personal income and spending report for December revealed a fairly robust spending environment. The inflation measure of the report, namely the core price consumption expenditure index rose at an annual rate of 1.7 percent, unchanged from the previous month. Private sector activity reports of the Institute Supply Management showed manufacturing activity rising to the strongest level since November 2014, while non-manufacturing activity held steady.

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