by Kim | Sep 22, 2025
The key events shaping the week ahead: US PCE Inflation, Fed speeches including Fed Chair Powell, S&P Prelim PMIs September
Recap from last week: Central Banks & Signalling
Central bank decisions last week were largely as expected. The decision by the Fed to cut rates was well telegraphed, led by rising downside risks to the labor market. The central bank decisions outside of the US, the BoC and BoE, also reflected concern over weakness in domestic growth and labor market outlooks. The exception was the BoJ, which, despite remaining on hold, maintained a bias towards policy normalization.
The FOMC cut the FFR by 25bps as expected. There was one dissenting vote – Governor Miran, who preferred a 50bps cut at this meeting. As outlined at Jackson Hole, the reason for the Fed cut was due to the shift in the balance of risks.
Accordingly, we judged it appropriate at this meeting to take another step toward a more neutral policy stance. Source: FOMC Decision 17 Sep 2025
In the context of the Fed’s dual mandate, near-term risks to inflation are tilted to the upside, while risks to employment are tilted to the downside. Though the balance between the two risks is not yet at parity, Fed Chair Powell stressed that it was the faster deterioration in labor market conditions that necessitated the rate cut. The Committee acknowledged this change by removing the word “solid” from its characterization of the labor market, with Powell noting, “overall, the marked slowing in both the supply of and demand for workers is unusual.”
On inflation, the FOMC decision reflected the view that the impulse from tariffs would be “relatively short-lived, and a one-time shift in the price level.” This framing is consistent with the sentiment of Governors Waller and Bowman, and as signalled by Powell’s shift at Jackson Hole. This provides the rationale to ‘look through’ current firm readings on inflation. However, the SEP hinted at persistence, reflecting expectations that inflation will ease more slowly into next year. Powell indicated that while short-term inflation expectations had moved up, “beyond the next year or so,” measures of long-term inflation expectations remain consistent with the 2% inflation target.
The main focus of the decision shifted to the nuance in the guidance regarding the path of the FFR. The main question was over whether this cut was the start of a series of rate cuts to bring the policy rate to neutral rather than just one cut ‘toward neutral”. The FOMC seems to have retained optionality here – possibly a necessary approach for navigating the tension in its dual mandate.
Guidance clearly reflected a shift in the Fed bias toward cutting, though it was tempered by Chair Powell reinforcing that “policy is not a preset path” and that the Fed remained data dependent. In the press conference, Powell even agreed that this could be viewed as a risk management cut – especially given that participants had still upgraded median growth and inflation outlooks for both this year and next. But then later, Powell also acknowledged that a single 25bps cut wouldn’t make a huge difference to the economy – instead suggesting that the signalling of the path of rates was more important. The SEP reflected that shift in the trajectory of the near-term policy rates amid labor market risks (more cuts this year); however, the longer-term destination for the FFR remained unchanged/anchored at 3%.
Powell will be speaking again this week and may elaborate further on the decision and outlook. For now, if the economy falters or labor market conditions continue to weaken, then the Fed has clearly signalled its willingness to cut in a series of cuts, aligned with market expectations. The longer run projections remain unchanged.
US data last week reflected the mixed picture on the economy as presented by the Fed Chair. However, retail spending growth firmed more than expected in Aug, while measures of residential housing activity were weaker than expected. The latest Atlanta Fed GDP nowcast remained at an elevated pace of +3.3% so far in Q3. In a tentative positive sign for the labor market, there was a further moderation in the level of continuing claims, now down to 1.92m (edging lower and not worsening), while the spike in initial claims in the prior week was reversed.
The Fed wasn’t alone in recognizing a shift in its domestic risk balance. Its most exposed trade partner, Canada, was responding to the external threat of tariff-driven growth and labor market weakness, leading the BoC to cut rates by 25bps. Since Jul, the balance of risks had shifted. The labour market had weakened further with job losses concentrated in trade-sensitive industries, employment growth had slowed in the rest of the economy, and the unemployment rate had increased to 7.1%. At the same time, upward pressure on underlying inflation had diminished. The decision to remove retaliatory tariffs also reduced the upside risk to domestic inflation. While guidance remained suspended, the decision noted a “clear consensus to lower our policy rate for the first time since Mar”.
The BoE stayed on hold at this meeting. This was a 7-2 decision in favour of a hold; two members voted for a 25bps cut. The BoE stayed on hold in line with its guide for a gradual and careful approach to reducing restrictiveness of policy – balancing still upside inflation risks with subdued growth, a loosening labour market, and a margin of slack emerging in the economy. The decision noted that “upside risks around medium-term inflationary pressures remain prominent in the Committee’s assessment of the outlook”. The two dissenters highlighted weakness in domestic demand and emerging slack, together with recent developments pointing to downward risks to global growth. They argued that a less restrictive policy was required to insure against an increased risk of recession, below-target inflation, and a further deterioration in supply capacity.
Finally, the BoJ kept its policy rate on hold as expected. The normalization bias remained in place, signalled by two developments. First, the BoJ announced that it would continue to normalize its balance sheet by commencing sales of its ETF holdings, at a pace that would “avoid introducing destabilising effects on markets”. Second, the 7-2 vote to hold was a surprise, with two members preferring a rate hike at this meeting. Governor Ueda did not guide on expectations of a hike at the Oct meeting, instead noting that the BoJ will still assess the impact of tariffs on the economy.
Outlook for the week ahead: US PCE Inflation, Fed speeches including Fed Chair Powell, S&P Prelim PMIs September
With questions over the persistence of inflation, the degree of weakening in labor market conditions, and the near-term path of policy rates, US data will remain firmly in focus. This week will remain US-centric with the Fed-preferred PCE inflation date for Aug, key spending and activity data, and a notable number of Fed speeches, including Fed Chair Powell.
The latest preliminary S&P PMIs for Sept will be released this week, providing a further update on the broader global growth momentum into the final month of Q3.
Key factors & events to watch this week:
US PCE inflation and the tariff narrative.
This week, the Fed-preferred PCE inflation gauge will be released for Aug, with markets already anticipating inflation measures to be little changed, but remain firm over the year. For now, we can continue tracking tariff and non-tariff effects on inflation. Last week’s import price data still suggests that tariffs are, on aggregate, being absorbed by US importers/firms, as well as by US consumers.
- Headline PCE inflation is expected to increase by +0.2% over the month in Aug, the same pace as in Jul. The annual rate is expected to increase by +2.7% in Aug, up from +2.6% over the year in Jul. The latest SEP sees the median headline PCE inflation rate ending the year at +3%.
- Core PCE is expected to increase by +0.2% over the month in Aug, down from +0.3% in Jul. The annual rate is expected to be unchanged at +2.9%. The latest SEP sees the median core PCE inflation rate ending the year at +3.1%.
Manufacturing and labor market pressure points.
While there is little specific labor market data this week, there will be several activity releases and the regular initial claims data to track momentum in activity.
- Activity surveys for Sept: The prelim S&P PMIs across manufacturing and services, as well as several other regional manufacturing surveys, will offer the latest view of any changes in growth momentum, forward-looking expectations, hiring sentiment, and pricing.
- Durable goods orders for Aug are expected to fall by -0.4%, after a -2.8% fall in Jul.
- Labor: Initial and Continuing Jobless Claims provide a high-frequency check on the labor market. Initial claims are expected to remain firm at 240k, up from 231k in the prior week. Last week, continuing claims continued to edge lower to 1.92m.
Q2 GDP growth and tracking of Q3 consumer spending, income, and sentiment.
- The second estimate for US Q2 GDP growth will be released, and is expected to confirm growth of +3.3% annualized in Q2.
- The prelim advanced economic indicators for Aug will be released, providing an important first view of the goods trade balance for the month, which will be an important input for the Q3 growth tracking. Last month, the goods trade balance (deficit) widened back out to -$103.9bn.
- PCE personal spending is expected to increase by +0.5% in Aug, after a similar +0.5% increase in Jul.
- PCE personal income is expected to increase by +0.3% in Aug, slowing slightly from +0.4% in Jul.
- US housing: New home sales are expected to remain little changed in Aug at a 0.65m annualized rate. Existing home sales are expected to ease slightly in Aug to 3.98m annualized, from 4.01m in Jul.
Unifying the US Fed’s messaging.
According to the calendars, there will be at least ten Fed officials speaking this week. There will be several speeches of note on the economic outlook, including Fed Chair Powell. We’ll be looking for any further color related to last week’s Fed decision to cut and the outlook for policy.
- US Fed Chair Powell is scheduled to speak on Tues, 23Sept, on the economic outlook.
- Newly appointed Fed Governor Miran will give a speech titled “Non-Monetary Forces and Appropriate Monetary Policy” at the Economic Club of NY on Mon. Miran was the dissenting vote at this last meeting, so he may provide further insight into that dissent.
- Vice Chair for Supervision Bowman will give several speeches throughout the week, including her views on the economic outlook.
S&P Global Prelim PMIs – September.
Finally, the prelim S&P PMIs for the key developed markets will be released this week.
This week, the US Treasury will auction and settle approx. $518bn in ST Bills and the 2-year FRN, with a net paydown of $16bn. This week, the US Treasury will also auction the 2-year, 5-year, and 7-year Notes – and will settle, together with the 20-year Bond and 10-year TIPS, on 30 Sep next week, together raising approx. $93bn in new money.
QT this week: Approx $10.5bn of ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 15, 2025
The key events shaping this week; Key central bank meetings, headlined by the FOMC, US retail sales, and global CPI reports.
Recap from last week: The Case for a Fed Cut
The latest U.S. inflation data is not likely to derail Fed Chair Powell’s signal to cut rates at this week’s FOMC meeting. While inflation remains firm and above target, the numbers were consistent with how Powell set up his shift at Jackson Hole, which was to now acknowledge that a “reasonable base case is that (tariff) effects will be relatively short-lived”. This has created the scope for the Fed to ‘look through’ tariff effects, especially as risks to the labor market have increased.
The latest CPI data still paints a picture of broadly steady inflation. This is despite some visible tariff effects, especially in core goods, and some other pockets of firmer inflation. The US headline CPI was higher than expected in Aug and increased to +2.9% from +2.7% in Jul. The monthly pace was higher than expected at +0.4% and has accelerated in each of the last three months. The 3-month annualized rate is now up to +3.5%. Food inflation was a notable increase this month and is back up to +3.2% over the year. Energy prices also firmed.
Importantly, the underlying core measures remained mostly steady. Core CPI came in as expected, remaining unchanged at +3.1% in Aug, despite a further increase in core goods inflation to +1.5% over the year. For context, annual core goods inflation (deflation) averaged -0.33% in the five years prior to the pandemic. The 3-month annualized rate for core goods inflation is now up to +2.8%, reflecting a consistent firming of monthly inflation over the last 3 months. Core services inflation saw little change versus the prior month, remaining +0.35% over the month, and stuck at an annual rate of +3.6% over the last five months. The 3-month annualized rate is now up to +3.9% reflecting some of the near-term firming.
The median and trimmed mean measures indicate that underlying inflation remained mostly steady in Aug. The trimmed mean, removing outliers, edged higher from +3.2% to +3.3% in Aug, suggesting only marginal broadening out of inflation pressures. The median, which is more robust to outliers, stayed unchanged at +3.6% over the year, also suggesting that despite the increase in the headline inflation rate, underlying pressures remained contained.
The PPI was the other important inflation release this week. The PPI measures the average change in the selling prices received by domestic producers for their output. The context for PPI is whether US producers were raising their selling prices due to rising input costs. Headline PPI did not accelerate this month after firming in Jul, and came in much lower than expected. Over the course of the year to date, there has not been a consistent firming in headline PPI, but rather, some pockets of inflation where you might expect to see tariff effects; final demand goods (ex-food & energy) prices are showing a more persistent inflation effect, rising to +2.9% over the year, and the 3-month annualized rate rising to +3.7%. Across services, trade services PPI moved down notably this month, contributing most to the fall in overall PPI services inflation. The fall in trade services PPI mostly reflected a margin squeeze for wholesalers across vehicles and machinery. This is a volatile measure, so we’ll have to see how this evolves.
Together, elements of the CPI and PPI indicate how the Fed-preferred PCE inflation measure is likely to evolve (due in several weeks). Core PCE inflation is expected to be unchanged at +2.9% in Aug, with the monthly rate slowing from +0.3% in Jul to +0.2% in Aug. This would still be below the current (June FOMC) median projection for core PCE of +3.1% over the year (end of 2025).
While the inflation data provides some room for the Fed to ease, other reports this week added further to the cautious labor market backdrop, possibly adding to the rationale for restarting rate cuts. The latest Conference Board employment trends index continued to fall in Aug, reaching its lowest level since 2021. The report highlighted that while the recent fall was in line with a “post-pandemic normalization”, the “degree of weakening in the August components is disconcerting”.
Initial claims spiked notably higher last week to 263k. It’s unclear whether this is renewed weakness, as most of the increase appears to be attributed to one state, and the report also reflects a shortened holiday week. Continuing claims have remained unchanged at 1.93m.
Finally, the BLS preliminary estimate of its non-farm employment benchmark revision for the year to Mar 2025 showed non-farm employment was revised lower by -911k or -0.6%. For comparison, the BLS notes that “the annual benchmark revisions over the last 10 years have an absolute average of 0.2 percent of total nonfarm employment”. This prelim estimate appears to be a larger-than-usual revision and suggests that the labor market may have been notably weaker than survey data had initially indicated.
Ahead of the FOMC this week, US data broadly show a labor market with rising downside risks existing alongside a persistent/steady, but perhaps manageable, inflation situation.
Outlook for the week ahead: Central bank meetings (FOMC, BoC, BoE, and BoJ), US retail sales, global inflation
This will be an important week of central bank meetings, notably the FOMC, together with a broader read on the US economic pulse, as well as global inflation reports.
Key factors & events to watch this week:
The FOMC meeting 16-17 Sept.
- While a 25bps cut is broadly anticipated, there will be several other important points to watch.
- The press conference/decision will be important for highlighting the degree to which the Committee aligns with Powell’s shift at Jackson Hole. Dissents may also feature. While the Fed Chair has signaled the rising downside risks to the labor market, it will be important to see how the FOMC guides its approach to balancing the risks to its dual mandate – keeping inflation expectations anchored (it’s still elevated and above target) while addressing the risks to the labor market. We’ll also watch how the Fed shifts its characterization of the economy, inflation, and the labor market.
- The latest SEP will be released – this will be important to signal changes in the path of rates, as well as growth, inflation, and unemployment projections.
- It’s reported that the US Senate is to vote on Stephen Miran’s nomination to the Board of Governors on Monday, in time for him to attend the Committee meeting this week. This may affect the dynamic and the discussion on the outlook.
Central bank decisions.
There will be several other central bank decisions of note this week.
- The BoC will meet this week, and there is some expectation of a 25bps rate cut, especially given the weakening in the last two labor market reports.
- The BoJ is expected to stay on hold.
- The BoE is also expected to stay on hold.
US data to provide broader input on the economic pulse.
US data this week will cover retail spending, factory output, import and export prices, and key housing reports. This will provide a more comprehensive update to the GDP growth run-rate so far in Q3.
- US retail sales are expected to slow to +0.2% from +0.5% in Jul. Last month, the retail control measure (which feeds into the GDP measure) increased by +0.5%.
- Industrial production is expected to be 0% after falling -0.1% in Jul.
- US export and import price indexes (exclude tariffs) for Aug may provide some insight into whether exporters to the US are, on aggregate, absorbing tariffs or not. The import price index excluding fuel imports will be the key measure to watch.
- Building permits are expected to edge higher to 1.37m (annualized) in Aug, from 1.36m in Jul.
- Housing starts (this gets booked into GDP) are expected to fall to 1.38m (annualized) in Aug, from 1.42m in Jul.
- Initial claims are expected to fall back to 240k last week after increasing to 263k in the prior week. Continuing claims have remained around 1.93m.
- There will also be several regional manufacturing surveys – the NY and Philadelphia Fed surveys, providing an early look at manufacturing conditions in Sept.
Global Inflation and Data.
Outside of the US, there will be several important CPI releases as well as the latest Aus labor market report.
- Canada’s core CPI measures are expected to be unchanged; median +3.1%, trimmed mean +3%.
- UK headline CPI is expected to be unchanged at +3.8%, while core CPI is expected to edge lower to +3.7% in Aug from +3.8% in Jul.
- The final Euro area CPI for Aug is expected to confirm headline inflation at +2.1% and core inflation at +2.3%.
- The BoJ preferred measure of core CPI ex fresh food is expected to slow to +2.7% in Aug from +3.1% in Jul.
- The Aus labor market report is expected to show continued modest employment growth of +21k, while the unemployment rate is expected to be unchanged at 4.2%.
This week, the US Treasury will auction and settle approx. $609bn in ST Bills, Notes, and Bonds, raising approx. $39bn in new money. The US Treasury will also auction the 10-year TIPS and 20-year Bond this week – both will settle on 30 Sep.
QT this week: Approx $7.4bn of ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 8, 2025
The key events shaping this week: US CPI & PPI (Aug), ECB monetary policy meeting
Recap from last week: Confirming Downside Labor Market Risks
Fed Chair Powell’s speech at Jackson Hole revealed the Fed Chair’s new calculus: a shift in the balance of risks. This is an important lens for assessing the implications of last week’s US labor market data. The Fed is no longer in a “wait and see” mode. The slowing payroll numbers—regardless of the nuance in the household survey—have tipped the balance of risks in the labor market. The Fed’s concern is now focused on the shifting trajectory of the labor market, and Powell has signalled that they will act to ensure a slowdown doesn’t become a more severe, self-reinforcing deterioration.
Importantly, the US payroll data for Aug likely confirmed for the FOMC that downside risks to employment are rising. Non-farm payroll growth of +22k was much lower than the +74k expected for Aug. The revisions to Jun and Jul were also a net negative -21k, confirming that payroll growth has remained slower than previously reported, with payrolls now contracting in Jun by -13k. A clearer trend has emerged after the revisions: that payroll growth has essentially stalled since Apr 2025.
Aggregate hours worked were little changed in Aug. However, the stronger increase in Jul was revised lower to +0.1% over the month. The trend in aggregate hours worked has slowed since May, but remains steady over the last two months. Average hourly earnings have also remained fairly steady at +0.3% over the month, versus +0.3% in Jul. Together, slower payroll growth, steady hours, and modest hourly earnings growth paint a picture of more modest, but still positive, nominal income growth over the last two months.
The view of employment and unemployment in the household survey shows a more mixed picture, and even some important pockets of underlying resilience. The household survey showed that unemployment across the broader labor market demographic of 16yrs+ edged higher from 4.25% in Jul to 4.32% in Aug – a YTD high for the unemployment rate, which has been on a rising trend since late 2022. Across this broader demographic, participation and the employment to population ratio have also moved more notably lower since Apr this year.
However, the core working age group of 25-54years is reflecting a surprising degree of resilience. The unemployment rate was little changed at 3.6% in Aug – marginally above where it was a year ago at 3.56%. This was in spite of the more notable increase in participation this month, back up to 83.7% and just below the peak of 83.9% recorded a year ago. Importantly, the employment situation remains steady with the employment to population ratio remaining at 80.7%, unchanged from the start of the year. A year ago, the employment-to-population ratio was 80.9%, which was the peak in this post-pandemic cycle. So employment levels among the core working age group are still elevated and point to a still solid underpinning for the labor market.
Other reports, though, provide a more cautious backdrop for the labor market. The JOLTS data reflected the step down in labor market conditions in Jun and, at least some stabilized conditions in Jul. The fall in job openings in Jul provides a concerning view for a continued moderation in labor demand. The Challenger Job Cut announcements increased in Aug, suggesting pressure on layoffs on the horizon. For now, most of these layoffs still reflect “DOGE” actions; however, “market and economic conditions” are the second-most cited reason for job cut announcements. At the same time, hiring announcements remained subdued.
While signals from the labor market have continued to highlight downside risks, the US S&P PMIs were a little more resilient in Aug. The S&P PMIs showed improved momentum in manufacturing activity while services activity continued to expand at a moderate pace, edging down slightly. However, risks remain elevated. The uptick in manufacturing activity was in part fuelled by inventory, and not purely a sign of rebounding demand growth. Risks around inflation remain elevated due to tariffs. Despite the strong output performance, business optimism for the year ahead fell to one of the lowest levels in three years, linked to uncertainty over demand caused by government policy, particularly tariffs.
The anecdotes from the Fed’s Beige Book reported little or no change in economic activity since the prior period. Consumer spending was flat. Most districts reported little or no net change in employment over the last six weeks, noting firms’ reluctance to hire due to weaker demand or uncertainty. Price growth was described as moderate or modest. However, “most Districts” reported that firms were expecting price increases to continue in the months ahead.
Overall, the broader growth backdrop eased somewhat last week amid some of the crosscurrents in Aug activity data. The Atlanta Fed GDP nowcast edged down to a +3% run rate so far in Q3 – still a robust pace of growth.
Against this backdrop, a clearer picture is emerging of a stalling labor market within an economy that is navigating significant uncertainty and an unpredictable policy landscape. While the stalled hiring has not yet resulted in a sharper rise in layoffs or unemployment, that risk may be increasing.
Outlook for the week ahead: US CPI & PPI for Aug, ECB Monetary Policy meeting
This leads us to the second part of the Fed Chair Powell’s new calculus: a greater willingness to “look through” persistent inflation. At Jackson Hole, Fed Chair Powell shifted further toward the view that tariff-led inflation could be “relatively short-lived,” as these effects pass through to consumer prices. This sets the scene for the week’s US CPI and PPI reports for Aug, which may offer more clarity around how much of this persistent inflation is genuinely due to tariffs working their way through the supply chain. There is, however, an argument that tariff-led inflation will take longer to flow through to consumer prices. The inflation data, when combined with the Aug labor market data, will provide a more complete view of the Fed’s task next week: a labor market with rising downside risks existing alongside a persistent, but perhaps manageable, inflation situation.
Key factors & events to watch this week:
US Inflation
US inflation data is broadly expected to remain little changed over the year. Together, the CPI & PPI reports will provide a read-through to the Fed-preferred PCE inflation measure for the FOMC meeting next week.
- The US PPI for Aug will be released ahead of the CPI this week. Headline PPI is expected to slow to +0.3% over the month from +0.9% in Jul. Annual headline PPI is expected to remain unchanged at +3.3%.
- Core PPI is also expected to slow to +0.3% over the month from +0.9% in Jul. Annual core PPI is expected to slow to +3.5% in Aug from +3.7% in Jul.
- Headline CPI is expected to increase to +0.3% in Aug, from +0.2% in Jul. Annual headline CPI is expected to edge higher from +2.7% in Jul to +2.85% in Aug.
- Core CPI is expected to increase by +0.3% in Aug, unchanged from the pace in Jul. Annual core CPI is also expected to remain at +3.1%.
US Labor Market
- We continue to track the evolution of initial claims and continuing claims data. Initial claims are expected to remain little changed at +234k this week, after rising to +237k in the last week of Aug. This is now back above the 12-week average. Continuing claims for the week ending 23 Aug were little changed at 1.94m.
- The Conference Board Employment Trends Index for Aug will provide further context for last week’s US labor market reports.
- The BLS will also release its preliminary benchmark revision to the Payrolls Survey.
US Fed Speeches
It is the blackout period for Fed speeches ahead of the FOMC meeting next week. The confirmation of Stephen Miran to the Board of Governors remains on the fast track, with further news on the appointment likely this week.
ECB Monetary Policy Meeting
- The ECB is expected to keep policy settings unchanged, with the Deposit Facility Rate at 2%.
- Last week, Euro area CPI for Aug came in slightly higher than expected at +2.1%, edging above the 2% target, while the monthly pace increased by +0.2% after 0% in Jul. Core CPI remained at +2.3% against expectations of a fall to +2.2%, as the monthly pace also jumped to +0.3% after falling in Jul. Euro area Q2 GDP growth was confirmed at +0.1%, slowing from +0.6% in Q1.
This week, the US Treasury will auction and settle approx. $490bn in ST Bills, raising approx. $36bn in new money. The US Treasury will also auction the 3-year and 10-year Notes and the 30-year Bond this week – all will settle next week.
QT this week: Approx $8.6bn of ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 1, 2025
The key events shaping this week: US labor market data for Aug, ISM surveys, Fed Beige Book, Euro Area CPI Aug, Aus GDP Q2, Global S&P PMIs Aug.
Recap from last week: US Inflation & Growth Amid a Shifting Balance of Risks
One of the clearest messages from Fed Chair Powell’s Jackson Hole speech was the shift in his view of the balance of risks. In the near term, he noted that risks to inflation are tilted to the upside, while risks to employment have become tilted to the downside. This led Fed Chair Powell to adopt a “proceeding carefully” approach to adjusting its policy stance and signalled a cut likely at the Sept FOMC meeting.
“Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” Fed Chair Powell, Jackson Hole speech 22 Aug 2025
Powell offered two reasons for his shift. Firstly, he noted that the slowing demand and supply of labor suggested that downside risks to employment are rising. Secondly, he acknowledged that while tariff impacts on consumer prices were “clearly visible”, what was more important for monetary policy was whether these increases raised the risks of an ongoing inflation problem. He noted Governors Waller and Bowman view that a “reasonable base case” is that inflation impacts from tariffs will be relatively short-lived.
Governor Waller’s speech last week added to this cautious, but forward-looking tone. Governor Waller continued to push for recommencing rate cuts, advocating for a move towards a more neutral stance. He did, however, temper that by remaining data dependent on how quickly to move the policy rate to a more neutral setting. While he remained data-dependent on the pace of policy adjustments, he did not believe the Fed had fallen “substantially” behind the curve. Waller indicated that he supports a cut at the upcoming Sep meeting and anticipates additional cuts over the next three to six months, also appearing to take a cautious approach.
This shift in the Fed’s perspective means that the evolution of the upcoming data, including last week’s US inflation and growth data and this week’s labor market data, will be important for how the Fed may navigate a more equal weight to the risks on both sides of its mandate.
Last week’s Fed-preferred PCE inflation data showed persistent inflation pressure, but a significant acceleration was not evident. Both headline and core PCE inflation came in as expected, with headline PCE edging slightly higher to +2.6% while core PCE increased to +2.9% over the year. Most of the inflation pressure in the month was centred back on core services, which did accelerate to +0.4% over the month and to +3.5% over the year. Core goods inflation, where we’d expect to see some tariff-led effects, remained flat over the month, but accelerated to +1.1% over the year. Other important measures of underlying inflation indicate some easing in inflation this month, but remained firmer over the year after increasing since May. It’s likely still too early to see the full, broad-based tariff impacts, as they are likely to have a rolling effect. For now, the inflation picture remains one of persistence and likely supports Chair Powell’s view for the need to “proceed cautiously”.
Last week, several indicators suggested some improvement in the growth backdrop, supporting a more positive view for the economy. Firstly, Q2 GDP was revised higher to an annualized pace of +3.3%. This was led by a small upward revision from personal spending, but mostly from fixed investment spending. This was followed by a step higher in the latest Atlanta Fed GDP nowcast for Q3 growth, which increased last week to a +3.5% run rate. The main contributors to the faster Q3 growth so far in the quarter were from net exports and non-residential investment spending. Importantly, personal spending and income growth also firmed in Jul.
With inflation remaining persistent and growth showing signs of resilience, our focus now shifts to the other side of the Fed’s mandate: assessing the overall health of the US labor market in the week ahead. The upcoming labor market data for Aug will be a crucial test of whether the recent signs of a slowdown are temporary or a new, more concerning trend.
Outlook for the week ahead: US labor market for Aug, US ISM PMIs, Fed Beige Book, Euro Area CPI Aug, Aus GDP Q2, Global S&P PMIs Aug
At Jackson Hole, Fed Chair Powell signalled a shift in which both upside inflation risks and downside employment risks have become equally prominent. The evolution of incoming data will be important for how the Fed may navigate this challenge to balance both sides of its mandate. With inflation remaining persistent, but not worsening, the US labor market update for Aug will be important, especially given the slowdown and revisions in Jul. The key question this week is whether the US labor market continues to weaken after the slowdown in job growth in Jul and the concerning downward revisions to payroll growth in May and Jun. Other US data will provide further input into the growth momentum of the economy in Aug, ahead of the next FOMC meeting on 16-17 Sep.
Outside of the US, data will continue to provide a comparative view of growth, inflation, and employment impacts with upcoming central bank meetings this month.
Key factors & events to watch this week
A broad view of the health of the US labor market.
Broadly, we’ll be looking for any changes to that “slow hiring, slow firing” dynamic that currently characterizes the labor market. While non-farm payroll growth and revisions will be important, there will also be some focus on data indicating changes in labor supply.
- US non-farm payroll growth is expected to stabilize around +74k in Aug versus +73k in Jul. Revisions to Jul and Jun will be important to understanding shifts in the overall trend of payroll growth.
- The unemployment rate is expected to edge higher to 4.3% in Aug from 4.2% in Jul. Last month, the participation rate continued to edge lower to 62.2%, which helped to offset some of the weakness in employment growth, keeping the unemployment rate low.
- Avg weekly hours are expected to remain unchanged at 34.3 in Aug.
- Avg hourly earnings are expected to increase by +0.3% over the month and remain around +3.9% over the year.
- Job Openings via the JOLTS report for Jul is expected to slow to 7.24m in Jul from 7.43m in Jun (data lag by a month).
- The Challenger job cut announcements are expected to continue to ease.
- Initial claims are expected to remain unchanged at +229k over the week ending 30 Aug. So far, continuing claims have remained elevated – reflecting an ongoing cautious hiring environment.
US manufacturing and services momentum.
Key data releases this week will feed into another update on US growth momentum so far in Q3.
- Both the S&P and ISM PMI surveys across manufacturing and services will provide a view of growth momentum midway through Q3.
- US factory orders for Jul are expected to fall by -1.3% in Jul after a -4.8% fall in Jun.
- The full international trade report for Jul will be released; the advance report showed a widening in the goods trade deficit as import growth rebounded while export growth remained subdued.
US Fed Speeches & Data
- There will be limited Fed speeches this week. It will be the last week of speeches ahead of the blackout period next week, before the FOMC meeting on 16-17 Sep.
- The latest Fed Beige Book for the six weeks since mid-Jul, will be released this week. This will provide a range of business anecdotes regarding sales growth, pricing, sentiment, and labor market views.
- Hearings for Stephen Miran, the nominee to replace FOMC member Governor Kugler, are expected this week. The confirmation is expected to be expedited to fill the position before the Sep FOMC meeting.
Global growth, inflation, and employment.
Outside of the US, labour market, growth, and inflation data will be important ahead of several central bank meetings this month.
- The prelim Euro area CPI for Aug is expected to remain unchanged at 2%, versus 2% in Jul. Core CPI is expected to edge lower to +2.2% in Aug from +2.3% in Jul. The Euro area Q2 GDP is expected to be confirmed at +0.1%. ECB President Lagarde will give a speech early in the week at the ECB’s Legal Conference. The ECB meets on 10 – 11 Sep.
- Canadian labour market data for Aug is expected to show employment growth stabilized at +9k in Aug after falling -40k in Jul. The unemployment rate is expected to increase to 7% in Aug from 6.9% in Jul. The BoC meets in two weeks, just before the FOMC.
- Aus GDP for Q2 is expected to accelerate to +0.5% over the quarter. RBA Governor Bullock will give a speech after the GDP release (Technology & the Future of Central banking at the RBA). The RBA meets at the end of the month.
The broader suite of global S&P PMIs for August will be released this week, providing further insight into tariffs’ effects on global output, trade, prices, and business sentiment.
This week, the US Treasury will auction and settle approx. $739bn in ST Bills, Notes, and Bonds, raising approx. $160bn in new money.
QT this week: Approx $6.5bn of ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Aug 18, 2025
The key events shaping the week commencing 18 August 2025 are: the annual Jackson Hole Symposium on Central Banking, Prelim S&P PMIs August, Global Inflation: UK, Canada, Euro area, and Japan.
Recap from last week: Paving the Way to Jackson Hole
Last week, US economic data provided another important update on tariff impacts feeding into domestic inflation. The latest inflation reports intensified the debate over the trajectory of US inflation and the Fed’s response. The US CPI report was mixed, but initially offered some comfort on tariffs, despite rising core inflation. This, however, was followed by a much hotter-than-expected PPI report, which served as a reality check on the potential impact of tariffs. This highlights the Fed’s primary challenge: distinguishing between persistent, underlying inflation and the potentially temporary but still-concerning effects of tariffs. While the overall growth picture remained mixed, the full impact of tariffs on the broader economy remains a key unknown. All eyes will now be on the US Fed Chair this week at the Jackson Hole symposium for signals on how the Fed will navigate these unknowns.
To better understand these dynamics, the week’s US data provided three key perspectives on domestic inflation, starting with the consumer perspective. Headline CPI came in as expected – with food inflation easing slightly over the year, and energy prices falling – while underlying core inflation accelerated. Core inflation has two factors to disentangle: the impact of tariffs on core goods inflation and a further acceleration in core services inflation. On the core goods front, the tariff effect did not appear to worsen, with core goods prices rising again by +0.2% over the month and increasing to +1.1% over the year. While this seems low, context is important: core goods are no longer providing a deflationary offset like they did before the pandemic. This may complicate the Fed’s task of getting inflation back to the 2% target. Core services inflation remained firm at +3.65% and has stalled at this pace for the last five months, despite continued moderation in shelter prices.
Last month, we were concerned that consumer inflation pressure had broadened out among categories. From a shorter-term perspective, the monthly trimmed mean and median inflation rates eased in Jul, despite the firmer core CPI, suggesting somewhat less broad-based inflation pressure compared to Jun. However, the trend in the annual rates of trimmed mean and median inflation accelerated to new YTD highs this month. This could be an important indicator that inflationary pressures have become broader and remained more persistent than at the start of the year. This was also potentially reflected in some of the firming of consumer inflation expectations data from the prelim Michigan survey for Aug. In other words, consumer-facing inflation pressures are likely still persistent.
The second perspective was the PPI. This measures the average change in the selling prices received by domestic producers for their output. This month, the PPI came in much higher than expected, with both headline and core PPI increasing by +0.9% over the month and accelerating to +3.3% and +3.7% respectively. The release of the report provided a reality check on the potential for tariff impacts. All key areas of PPI final demand prices accelerated this month: goods, food, energy, and services prices. This has been the first month since the introduction of tariffs where the increase in the PPI has accelerated in a meaningful way, and potentially marks a shift where tariff and inflation impacts may be feeding into the system.
The final view is the import price index, which we are using as a proxy to understand whether importers, exporters, or both are bearing the cost of tariffs. The import price index measures the price of imported goods before any duties are applied. The index is used to deflate international trade statistics in the National Accounts data. If import prices are falling, then it’s likely that exporters are lowering prices to help offset the effect of tariffs on their products. If import prices are rising or little changed, then it’s likely that domestic importers are bearing the tariff duty. On aggregate, exporters to the US did not lower prices in Jul. The important index to focus on is the import prices excluding fuels. In Jul, import prices excluding fuels increased by +0.3%, after falling by -0.3% in Jun (revised lower). Over the year, import prices ex fuels were +0.9% in Jul, up slightly from +0.8% in Jun. The 3-month annualized pace is 0%. This suggests, on aggregate, that the burden of tariffs is falling on domestic importers.
Beyond the inflation data, this week’s releases provided a crucial read on the state of domestic demand and the labor market, the other side of the Fed’s balancing act. For the Fed, spending data last week showed a resilient consumer holding things together. Retail sales growth in Jul was relatively good, coming in at +0.5% as expected, with a positive upside revision for Jun to 0.9%. The Atlanta Fed GDPNowcast for the US Q3 GDP growth run rate was steady at +2.5%. The positive contribution from the spending report helped to offset some of the weakness in industrial output in Jul. Initial jobless claims have shown little change in the broad trend of low initial claims, with continuing claims remaining stubbornly elevated.
The broader global growth backdrop stepped down last week. Euro area and UK GDP growth slowed in Q2 as expected – likely reflecting a slowdown after tariff front-running activity in Q1. Japan’s GDP firmed at +0.3% after 0% in Q1. Key data out of China also reflected slower investment growth, slower retail sales growth, and slower industrial output growth for Jul. Even the latest RBA decision cautioned that trade policy developments were “expected to have an adverse effect on global activity”. With new reciprocal tariffs and trade agreements now in place for many, but not all, key trading partners, the crucial question for markets is how economies will adapt to the new tariff regime.
The overall inflation picture still poses a challenge for the Fed, with inflation remaining persistent and additional tariff effects likely, due to their lagged introduction and business uncertainty over final rates. Last week, a rising chorus of calls for a 50bps rate cut by the Fed in Sep was quickly swept aside after the hotter PPI data. The market is still holding onto more aggressive pricing for a rate cut, but the probability has been pared back markedly (Source: CME FedWatch). This diverges from the Fed’s cautious stance, though even within the Fed, there is dissent – mostly over the timing of the path forward. Our focus now shifts to the important Jackson Hole symposium this week.
Outlook for the week ahead: Jackson Hole, Prelim S&P PMIs August, Global Inflation: UK, Canada, Euro area, & Japan.
This week, the focus will shift from data to commentary. The market will be looking to Fed Chair Powell for clarity and guidance on the path of monetary policy. His speech at the annual Jackson Hole Symposium will provide an important lens for how the Fed is thinking about the inflation-labor market dual mandate amid the still notable unknowns on tariffs and complicated by dissent within the Committee and a hostile political backdrop.
Key factors & events to watch this week:
Jackson Hole Symposium, the US Federal Reserve, and the Monetary Policy Outlook.
- The Jackson Hole Symposium is the key event this week from 21-23 August, with the theme “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy”.
- US Fed Chair Powell’s speech is the key highlight, and this is scheduled for Friday, 22 August – the topic of his speech is the Economic Outlook and Policy Framework Review. While he is unlikely to give explicit forward guidance, it will be an opportunity to explain how he is weighing the recent data (persistent inflation versus weaker payrolls), the uncertainty over tariffs, and signalling on the path of policy settings.
- Other central bank speeches may also provide some context for expectations of a global slowdown amid rising tariffs.
- The FOMC Minutes of the last meeting will be released. Of interest in the last meeting was the dissent among committee members regarding the policy decision.
- Other speeches; notably, Vice Chair (Supervision) Bowman and Governor Waller will be speaking earlier in the week at the Blockchain Symposium.
US Domestic Demand and Activity.
Key housing data for Jul will be released this week and will provide an important input into the view of Q3 growth momentum.
- Building permits for Jul are expected to be little changed at 1.39m annualized, from 1.39m in Jun.
- Housing starts (will feed into the GDP nowcast run rate) are expected to moderate further in Jul to 1.3m annualized, from 1.32m in Jun.
- Existing home sales for Jul are expected to be little changed at 3.92m annualized, down slightly from 3.39m in Jun.
- Of note has been the recent rebound in mortgage applications – last week increasing by +10.9% as mortgage rates have begun to moderate. Most of this increase was led by refinance applications.
- US initial claims are expected to remain low at 227k for the wk ending 16 Aug, up slightly from 224k in the prior week. We will continue to watch the level of continuing claims, which remain elevated at 1.953m people.
Global Central Banks and Inflation.
- The RBNZ will meet this week and is expected to cut rates by a further 25bps.
- Global CPI reports will be in focus for several important central banks.
- Canada’s headline CPI for Jul is expected to be little changed at +1.9% over the year, with the monthly rate expected to increase by +0.4% in Jul from +0.2% in Jun. Measures of core inflation are expected to stay firm with the trimmed mean at +3% and the median at +3.1%.
- UK CPI for Jul is expected to edge higher to +3.7% in Jul, after rising to +3.6% in Jun. Rising domestic inflation has been led by key government policy changes.
- The Euro area final CPI for Jul is expected to confirm the prelim headline inflation rate at +2%, with core inflation remaining at +2.3%. Services inflation is expected to slow to +3.1% in Jul.
- Japan National CPI for July is expected to show that the main BoJ measure of underlying inflation, core CPI ex fresh food, moderated from +3.3% in Jun to +3% in Jul.
S&P Flash PMIs for August
S&P Flash PMIs for August will be released later in the week, providing further insight into tariffs’ effects on global output, trade, prices, and business sentiment.
This week, the US Treasury will auction and settle approx. $490bn in ST Bills, raising approx. $89bn in new money. The US Treasury will also auction the 20-year Bond and 30-year TIPS this week, and both to settle at the end of the month.
QT this week: Approx $12bn of ST Bills will mature on the Fed balance sheet and will be reinvested.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
