Latest Data Won't Sway Fed as it Looks to 2017 - and Trump!

As for how today's economic data will affect this week's Federal Reserve meeting, Eric Stein, co-director of global income at Eaton Vance, does not think it sway it too much from a quarter point rate hike. Producer prices in the U.S. rose at a faster pace than expected in November, moving closer to the Federal Reserve's 2% target. Meanwhile, U.S. retail sales in November rose at a slower rate than expected as a drop in auto sales dragged on the headline number. Sales increased 0.1% in November, its slowest increase in three months and a third of the pace anticipated. Auto sales declined by 0.5%, the largest decline in eight months. Excluding autos and gas, sales increased 0.2%. "I think the Fed is looking at the bigger picture," said Stein. "The economy is certainly accelerating, inflation is picking up and the markets have moved a lot since the presidential election. So that is really what the Fed is focused on right now." According to Stein, the intense sell-off in nominal Treasury bonds has been driven both by rising inflation expectations and higher real rates based on the anticipated policies of the Trump administration. In his view, the market see a new period of interest rates and inflation that will help and hurt specific bond sectors.