Daily Economic Outlook: 19th October, 2015

Concerns about the Chinese economy and speculation over when the Fed will begin to raise interest rates are likely to continue to remain the dominant immediate issues for markets. While the overnight release of Chinese data are unlikely to have materially altered ongoing speculation of further bouts of easing from the People's Bank of China, the reported health of the Chinese economy remains a key influence over the outlook for US monetary policy. 

Recent comments from Fed Governors Brainard and Tarullo have raised further doubts over the likelihood of a rate hike in 2015. Both Governors highlighted the  prolonged weakness of US inflation and openly questioned the idea that the tightening labour market was, at the moment, a useful sign of mounting price pressures. Given the backdrop of a light US data calendar and with the October 28 policy decision coming into view, remarks tomorrow by Governor Powell and New York Fed President Dudley are likely to attract considerable attention, said Lloyds Bank. 

For today, however, speeches by Fed Governor Brainard and Richmond Fed president Lacker provide the focus. Yet, with views from both of these FOMC members already well vocalised and the topics for the respective events largely unrelated to monetary policy, it is unlikely that they will provide much insight. 

Datawise, the NAHB housing market index will give an update on housebuilder sentiment in the US. Firming sentiment has been a key driver behind the ongoing recovery in housing starts, which recently rose to a 7½ year high. Strong consumer fundamentals and favourable mortgage rates continue to provide a supportive backdrop for housing and the sentiment is expected to have remained elevated in October and forecast the NAHB index holding at 62, says Lloyds Bank.