Rate watchers are looking ahead to the highly-anticipated Federal Open Market Commitee meeting on Tuesday. Economists are not expecting the Fed to change interest rates, but they are wondering how the it will play up the recent data in its policy statement.

In Canada, RBC Financial says the coming week will bring forth a few gems among the data releases. “It starts off with housing starts for the month of October and the Ivey purchasing managers’ index for November, both due out on Monday. Wednesday’s sole release is a third quarter update on capacity utilization rates. Vehicle sales for October are scheduled for release on Thursday, followed by the October trade balance on Friday,” it reports.

Looking at the trade picture, BMO Nesbitt Burns says that, “After a big snap-back in September, it will be well worth watching if exports, shipments, and wholesale trade maintain momentum in October. We believe that the sudden strength in U.S. activity and rejuvenated global demand will help power up Canadian exports with a 1.5% gain. At the same time, imports are also expected to post another solid increase, holding the trade surplus at a healthy level of $5.5 billion.”

On the housing picture, Nesbitt says that a 4.9% slip in October building permits suggests that construction activity likely tapered off somewhat in November. “However, underlying trends in homebuilding remain very strong, and starts are expected to nudge down only slightly to a 235,000 annual pace.”

Also next week, Bank of Canada governor, David Dodge, will be speaking at the London Chamber of Commerce on Monday. CIBC World Markets says that Dodge, “has plenty of ammunition to use in the coming week’s remarks in making the case for eschewing another rate cut for now, despite a soft outlook for inflation.”

In the U.S., an actual rate decision is scheduled for Tuesday. RBC says that next week’s releases also include wholesale trade during the month of October, due out on Monday.

“Thursday’s releases include weekly initial unemployment claims, retail sales for November, and business inventories in October. Friday closes off the week with updates on producer prices in November and the December edition of the University of Michigan’s consumer sentiment survey.”

But the Fed meeting will be the big event. “The Fed will somehow manage the tricky task of acknowledging the improved economic picture while defusing rate hike threats, and will, of course, leave the funds rate unchanged,” CIBC predicts.

TD Bank says it’s a slam dunk that rates will remain unchanged. “Markets will instead be focussing tightly on the statement accompanying the Fed’s decision. In its past few missives, the Fed has stated that rates can remain at current levels for a “considerable” period of time. The issue is whether the Fed will drop that part of the statement. If so, it will be a strong signal that the Fed is keeping its options open as well – and will start to set the stage for an eventual rate hike in the second half of 2004.”

However, Nesbitt believes that the widespread concern about a hawkish Fed shift has moderated. “We expect the Fed to acknowledge the much-improved tone in the economy in its rate statement on Tuesday, but to make it clear that no rate hike is imminent.”

In the other data, Nesbitt says that, “Retail sales are expected to register only modest gains for November and PPI may produce mild hints of price firmness in the crude- and intermediate-goods indexes. There has been surprisingly little increase in import costs despite the massive dollar decline on foreign exchange markets and this is keeping factory pricing well contained.”

“November retail sales will get a lift from a bounce in vehicles, but other store data look to have started the holiday season on a slow footing,” CIBC says. “We are due for a cooler figure for producer prices. Given the jump in the prior month, the bond market would be sensitive to an above-consensus PPI gain in November, but we’re comfortable with the market’s dovish expectations. Watch for the trade deficit to widen as light inventories draw in import growth, a reminder of the US dollar’s Achilles heel.”

The earnings lineup is also very light next week, with nothing of note on Monday. Inscape reports on Tuesday.

Wednesday is the heaviest day with reports from Micrologix Biotech, Sobeys Canada Inc. and Transcontinental Inc., the parent company of Investment Executive. On Thursday, Empire Company reports, as does MDS Inc.