US Economic Notes:What you need to know for the week ahead

Commentary for Monday: This week’s economic calendar is relatively sparsewith the main events centered upon US fiscal policy as the race toward tax reformshifts into high gear. Last week, the House Ways and Means Committee releasedits version of the tax reform bill, providing details on how the GOP intends toreform the tax code. The House will now begin marking up the bill and is expectedto vote on a final draft towards the end of this week. At the same time, theSenate will release its own version of the bill, which could differ significantlyfrom the House’s. In our view, the sticking points remain the same: the cappingof the mortgage interest deduction and proposed repeal of the state and localtax deduction are two substantial hurdles. Already, the National Associationof Homebuilders and the National Federation of Independent Business havevoiced opposition to the House bill, which is noteworthy given their relativelyconservative leanings.

    Following last week’s FOMC meeting and the nomination of Jay Powell to replaceJanet Yellen as Fed Chair, the Fedspeak picks up this afternoon with New YorkPresident Dudley. While Dudley’s speech on “Lessons from the Financial Crisis”may have some interesting takeaways, we do not expect him to break newground with respect to near-term policy. With the unemployment rate now atits lowest level since December 2000 and the economy racking up back-to-backquarters of 3%-plus growth, we doubt Dudley would say anything to cause marketparticipants to rethink their expectations for a December rate hike. As an aside,New York Fed Vice President Simon Potter, who is responsible for managingthe System Open Market Account, will be speaking on “Implementing MonetaryPolicy with the Balance Sheet” at an ECB workshop in Frankfurt.

    More importantly on Tuesday, newly-minted Fed Governor Quarles, who is nowthe Vice Chairman of Supervision, will be speaking at the annual ClearinghouseConference. Given that this is his first official speech as a Governor, we willbe paying close attention for clues as to his policy leanings. At present, wesee Quarles as a centrist, similar to soon-to-be Chairman Powell. Note thatcurrent-Chair Yellen will be speaking on Wednesday. However, she is receivinga government service award so we doubt she will touch on monetary policy orthe economic outlook.