The Bureau of Labor Statistics will release the latest data from a closely watched inflation gauge at 8:30 a.m. today. It’s another sensitive moment for the U.S. economy and policymakers, but initial indicators published this week suggest inflation continues to cool.
The latest Consumer Price Index data will give the Fed a broad look at the state of inflationary pressures across the economy as the central bank considers a rate cut next month. Economists expect a monthly rise in consumer prices of about 0.2% after they fell by 0.1% in July.
Markets got a boost on Tuesday after a separate but related index from BLS was released — the Producer Price Index, which tracks business and production costs. The PPI rose by just 0.1% in July, lower than expected and well within typical inflation readings. Annual PPI inflation came in at 2.2%, just barely above the Fed’s inflation target.
Markets surged on the news, even though a rate cut by September is hardly in doubt with other signs of cooling in the economy, including the once-teflon labor market.
So today’s CPI report will be crucial for the Fed and outside economists as the world grapples with this weird moment in the U.S. economy.
There are plenty of political winds to keep track of with this release, too. As we’ve written elsewhere, voter perceptions of the economy tend to revolve tightly around the prices they pay for staples — namely food and gas, whose prices tend to be the most volatile tracked by economists.
So even if overall prices are down – which seems likely – a spike in prices at the grocery store or gas pump may do more to inform voter perceptions than the number itself. This close to a general election, every number counts.
Speaking of the labor market: Keep an eye on unemployment claims. Whenever we start worrying about a recession, the weekly claims data published by the BLS starts to get a lot more scrutiny. Those figures will be published on Thursday morning.
Late next week, the Fed’s top officials will flock to Jackson Hole, Wyo., for its annual economics symposium. This week’s data will play a key role in those conversations and speeches.
