Lawmakers contend with a potential government shutdown, oil prices rising further above $90 per barrel, and housing data is expected out this week — all ahead of the Fed's September FOMC meeting this week. Reporting live from the Nasdaq, Yahoo Finance anchors Seana Smith and Brad Smith break down how these events and the inflationary trends seen in energy prices and the U.S. housing market could influence Fed officials' next decision on interest rates
- Well, we've got a big week ahead. And here is what we're watching. Over the weekend, House Republicans unveiled a deal that would push the shutdown deadline to October 31. But the bill's provisions aren't popular among Democrats in the Senate, meaning it's unlikely to pass the chamber here.
SEANA SMITH: And oil creeping higher yet again this morning, fueled by supply cut extensions from Saudi Arabia and Russia. High gas prices were to blame for an inflation speed up in August-- a red flag for the Fed.
- And a big week for housing data, starting later today with the home builder confidence index. What will the latest numbers show us about record low house affordability? All right. So let's pick this apart just a little bit here, Seana. Because if we think about, of course, what is going to be an investor's kind of eyesight and mind, first and foremost, it's going to be what the Fed says, even though this is looked at as somewhat of a nothingburger type of meeting and all eyes being on November.
So in this interim period of time, you've got more economic data. And especially on the housing side where we've heard more from the Fed, just about how they're continuing to track affordability and whether or not homeowners are willing to list some of their existing homes because many of them don't want to get into a higher rate themselves, if they then have to purchase a new home, once they get out of that one and struggling to find buyers given the financing options available.
SEANA SMITH: Yeah. There certainly is a lot on the plate right now. The Fed has an extremely tough job, especially at this point in the economic cycle. They're trying to figure out exactly what is needed to bring inflation back to that 2% target. The Fed has not backed down from that 2% target.
But like you said, higher oil prices, higher gas prices could be a bit of a headache here for the central bank, especially when we talk about that last mile. What exactly needs to happen in order to see a continued improvement on inflation. But when it comes to oil prices, right now we're sitting at the highest level that we've seen in just about 10 months. I want to point out though, there was a note out here from Citi this morning and Morse over there saying that prices, they could top $100 a barrel, but they likely will not stay there.
He talks about, even though we are seeing supply cuts from OPEC member supply from countries outside of OPEC like the US, likely to see supply ramp up their increase by about 1.8 million barrels a day this year, by another a million barrels a day next year. So maybe that, at least down the line when we talk about the next couple of months, that could ease some of the pressures that we're seeing on oil prices and therefore help the Fed in its case here trying to get inflation under control.
But I think oil prices is going to be one of those top things to watch this week and then going into the end of the year.
- Absolutely. Trickles down and hits everything from just our transportation. How we travel day in and day out, also the goods that are produced as well. So all of these costs get factored in one way or another. And then you think about the timeline that we're going to be watching for this week. We've also got some Fed speak towards the end of the week. That's going to come on Friday here after the decision is made, the interest rate decision coming on Wednesday here.
So all of that considered, you're going to be looking at housing to start off the week, you've got the Fed midweek, and then of course, to cap off the week with some of that Fed speak that we mentioned. Going to be looking for that from, it seems, Cook as well as Neel Kashkari-- Minneapolis Fed President, as well as Mary Daly-- San Francisco Fed President. So all that coming forward this week.
SEANA SMITH: Is certainly something that investors will be closely listening to. Any indication, any commentary there from other Fed officials just in terms of how they're looking at future rate hikes potentially.