Federal Reserve to decide on interest rates

After last week's rate decisions by the Bank of England (BoE) and the European Central Bank, the US Federal Reserve is expected to go down the same path this week and lower rates to 0.5% from 1%, although predictions of a 75 basis points cut have also been put forward by some market participants. After the rate decision, much weight will also be given to the accompanying statement, as the Fed runs out of its monetary policy arsenal.

A few hours prior to this week's rate decision, inflationary figures for November will hit the wire. Consumer Price (CPI) data is expected to continue a downward trajectory, and year-on-year CPI figures are expected to fall to 1.5%, down from 3.7%.

On the housing front, there is some data on schedule, with housing start-ups, building permits and MBA mortgage applications figures. Figures on new jobless claims and continuing claims will wrap up the week in the US.

In Europe, employment data in the Eurozone will kickstart the economic data schedule. Purchasing Manager Index (PMI) for both services and manufacturing are expected to sink lower, as both readings languish below the 50 level mark that separates growth from contraction.

CPI data will feature midway through the week, and, like on the other side of the Atlantic, figures are expected to drop. In fact, year-on-year headline CPI is forecast to drop to 2.1% from 3.2%.

Likewise, the UK economic schedule will feature the CPI figures for November. On Wednesday, the BoE minutes will be released, and unemployment figures are expected to show a rise to 6%, up from 5.8%. Monthly retail sales will be the last release for the week, and another drop is expected.

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