The inflation rate is expected to dip below zero for the first time in 50 years. The consensus is looking for core CPI to fall 0.10% month-over-month but increase 1.90% year-over-year.

"As it happens, the consensus forecast anticipates only the minimum fallback from November's 2.0% annual rate; but then the consensus has been a poor guide to the past two months' worth of inflation figures," wrote Neil Mellor, currency strategist from the Bank of New York Mellon.

The Fed's response to deflationary risks will be watched carefully this week. Bernanke will be in London to speak on the crisis and the policy response to it. He last spoke in public on Dec. 4 at a conference organized by the Federal Reserve in Washington.

"Clearly, hope abounds that Mr. Bernanke will flesh out further details of the Fed's intentions towards the printing press; but then, given that the subject of 'quantitative easing' is now firmly in the public domain, could it be that Mr. Bernanke will instead use the occasion to reassure investors of the Fed's obligations to swiftly mop-up liquidity once a recovery is underway," Mellor wrote.

U.S. advance retail sales are expected to fall 1.2% month-over-month in December following the prior month's 1.8% decline. Peter Possing Anderson, senior analyst at Danske Bank, said he believes retail sales will fall 1.1% month-over-month due to lower prices rather than a decline in real spending.

U.S. Industrial production for December will also garner attention this week. Economists expect industrial production to deteriorate further by 0.80% following the prior month's 0.60% decline.

In what can be the seen as President-elect Barack Obama's attempt to put his stamp on the Federal Reserve, Fed nominee Daniel Tarullo will testify at his Senate confirmation hearing on Jan. 15. Tarullo, a law professor at Georgetown, has been a senior economic advisor to Obama and Bill Clinton.

Turning to our attention to Canada, the Bank of Canada will release its Business Outlook Survey along with its Senior Loan Officer survey for the fourth quarter. In the prior quarter, both surveys reported tighter credit conditions.

All times in EST:

Monday:

8:30 CA New Housing Price Index M/M NOV Exp.: -0.3% Prior: -0.4%

10:30 CA Business Outlook Future Sales Q4 Prior: +3.0

10:30 CA BOC Senior Loan Officer Survey Q4 Exp.: +55 Prior: +49.8

12:40 US Fed's Lockhart Speaks on U.S. Economic Outlook in Atlanta

13:00 US Treasury to Sell USD26 Billion 3-Month Bills

13:00 US Treasury to Sell USD27 Billion 6-Month Bills

Tuesday:

8:00 US Fed's Bernanke Speaks on Crisis, Policy Response in London

8:30 CA International Merchandise Trade NOV Exp: +3.2B Prior: +3.8B

8:30 US Trade Balance NOV Exp: -$51.0B Prior: -$57.2B

10:00 US IBD/TIPP Economic Optimism JAN Prior: +45.0

13:00 US Treasury to Sell USD22 Billion 52-Week Bills 13-Jan

13:00 US Treasury to Sell 4-Week Bills 13-Jan

14:00 US Monthly Budget Statement DEC Exp: -$63.8B Prior: +$48.3B

17:00 US ABC Consumer Confidence Week Ending 11-Jan Exp.: -48 Prior: -49

17:00 US Fed's Lacker Speaks on Economic Outlook in South Carolina 13-Jan

Wednesday:

7:00 US MBA Mortgage Applications Week Ending 9-Jan Prior: -8.2%

8:30 US Import Price Index M/M DEC Exp: -5.3% Prior: -6.7%

8:30 US Import Price Index Y/Y DEC Exp: -9.6% Prior: -4.4%

8:30 US Advance Retail Sales DEC Exp: -1.2% Prior: -1.8%

8:30 US Retail Sales Less Autos DEC Exp: -1.3% Prior: -1.6%

8:30 US Fed's Plosser Gives Economic Outlook in Newark, Delaware

10:00 US Business Inventories NOV Exp: -0.5% Prior: -0.6%

10:30 US DOE U.S. Crude Oil Inventories Week Ending 9-Jan Prior: +6682K

10:30 US DOE U.S. Gasoline Inventories Week Ending 9-Jan Prior: +3334K

10:30 US DOE U.S. Distillate Inventory Week Ending 9-Jan Prior: +1790K

10:30 US DOE U.S. Refinery Utilization Week Ending 9-Jan Prior: +2.11%

13:00 US Fed's Stern Speaks in Cedar Rapids, Iowa on Policy Prospects

14:00 US Fed Releases Beige Book Economic Report

Thursday:

8:30 CA New Motor Vehicle Sales M/M NOV Exp: -7.4% Prior: -0.9%

8:30 US Producer Price Index M/M DEC Exp: -2.0% Prior: -2.2%

8:30 US Producer Price Index Excluding Food & Energy M/M DEC Exp: +0.1% Prior: +0.1%

8:30 US Producer Price Index Y/Y DEC Exp: -1.3% Prior: +0.4%

8:30 US Producer Price Index Excluding Food & Energy Y/Y DEC Exp: +4.1% Prior: +4.2%

8:30 US Initial Jobless Claims Week Ending 10-Jan Exp: +501K Prior: +467K

8:30 US Continuing Claims Week Ending 3-Jan Exp: +4620K Prior: +4611K

8:30 US Empire Manufacturing JAN Exp: -25.0 Prior: -25.76

10:00 US Philadelphia Fed JAN Exp: -35.0 Prior: -32.9 Revised: -36.1

10:00 US Fed Nominee Tarullo Testifies at Senate Confirmation Hearing

10:30 US EIA Natural Gas Storage Change Week Ending 9-Jan

13:40 US Fed's Evans Speaks to Bankers in Madison, Wisconsin

13:40 US Fed's Lockhart Speaks on U.S. Economic Outlook in Mississippi

15:45 US Fed's Yellen Speaks in San Francisco on U.S. Economic Outlook

Friday:

8:30 US Consumer Price Index M/M DEC Exp: -0.9% Prior: -1.7%

8:30 US Consumer Price Index Excluding Food & Energy M/M DEC Exp: +0.0% Prior: +0.0%

8:30 US Consumer Price Index Y/Y DEC Exp: -0.1% Prior: +1.1%

8:30 US Consumer Price Index Excluding Food & Energy Y/Y DEC Exp: +1.8% Prior: +2.0%

8:30 US Consumer Price Index Core Index (SA) DEC Prior: +216.849

8:30 US Consumer Price Index (NSA) DEC Prior: +212.425

9:00 US Net Long-term TIC Flows NOV Prior: +$1.5B

9:00 US Total Net TIC Flows NOV Prior: +$286.3B

9:15 US Industrial Production DEC Exp: -1.0% Prior: -0.6%

9:15 US Capacity Utilization DEC Exp: +74.5% Prior: +75.4%

10:00 US University of Michigan Confidence JAN Preliminary Exp: +59.0 Prior: +60.1

12:15 US Fed's Lacker Speaks on U.S. Economic Outlook in Richmond

By Steve Stecyk, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it

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