Fed expected to get a breather after months of inflation pressure

The Fed is expected to get a breather after months of inflation pressure, as its preferred inflation gauge likely slowed down last month.

The personal consumption expenditures index, excluding food and energy, is forecast to have risen 0.2% in August, down from 0.3% in July, according to Bloomberg.

On a yearly basis, the number is projected to stay at 2.9%, which is still far from the Fed’s target. That shift gives central bankers just enough space to deal with a labor market that’s clearly showing cracks.

Chair Jerome Powell pointed to that slowdown in jobs to justify the first rate cut of the year, which happened Wednesday. But he didn’t pretend the job was done. “It’s challenging to know what to do,” Powell said. “There are no risk-free paths now.”

Despite the cut, inflation remains a concern. President Donald Trump’s tariffs, still crawling through the system years after they were introduced, continue to affect costs in the economy. And even with signs of cooling, no one at the Fed seems ready to relax.

Fed officials speak across the country as consumers slow down

This week, several Fed policymakers are stepping up to speak publicly. Powell will deliver remarks Tuesday in Rhode Island, continuing to guide expectations without making any guarantees.

Stephen Miran, newly appointed as governor and temporarily on leave from his role as chair of the White House Council of Economic Advisers, will also speak. He’ll be joined by Michelle Bowman, Mary Daly, and Alberto Musalem, each expected to share their take on the direction of the economy.

Friday’s report isn’t just about prices. It’s also projected to show that inflation-adjusted consumer spending grew at a slower pace in August.

With less disposable income floating around, economists will also study personal income data to see if Americans can keep spending. Consumption still makes up most of US economic activity, and if that stalls, so does growth.

North of the border, Canada is dealing with its own troubles. The US trade war hammered Canadian exports, causing a 1.6% contraction in GDP from April to June.

Now, the July industry data and an early read on August will show whether things are turning around. Tiff Macklem, head of the Bank of Canada, will speak in Saskatchewan on how global trade chaos is still influencing inflation and interest rate decisions.

Meanwhile, Statistics Canada is set to release second-quarter population data as Prime Minister Mark Carney’s administration tries to undo the immigration surge that overwhelmed housing.

Asia and Europe unload economic data while central banks hold or cut

This week, central banks in Sweden, Switzerland, and Hungary are expected to keep interest rates unchanged, while Mexico and Nigeria are likely to cut theirs.

In Asia, the data drop begins Monday with South Korea’s 20-day trade stats, one of the earliest looks at chip exports and global demand. China will announce its loan prime rates the same day, with markets betting on no change.

Tuesday brings purchasing manager indexes from Australia and India. India’s data will be key since domestic demand has held up even as manufacturing weakens.

Singapore and Malaysia will also post inflation figures on Tuesday, followed by Australia’s partial price report on Wednesday, important for shaping the Reserve Bank’s future calls.

Midweek, Japan enters the spotlight. It will release PMI numbers, followed by retail sales on Thursday and inflation data for Tokyo on Friday. Those price figures are seen as a preview of national trends and will factor into how the Bank of Japan thinks about policy normalization.

To close the week, Singapore will publish industrial production numbers, South Korea will report on both business and consumer sentiment, and New Zealand will release consumer confidence figures.

On Saturday, China will share August industrial profit data, a critical signal for whether earnings are finally recovering from months of deflation. But spending by the Chinese government, which slowed for the second month in a row, has made July and August the country’s weakest months this year.

The week ends with more updates: Malaysia’s inflation numbers, Indonesia and Thailand’s reserve data, a Philippines budget balance report, and Pakistan’s GDP figures. It’s a busy global calendar, but all eyes are still on the Fed.

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