US Inflation and Labor Market Trends in Focus of Fed Decisions

The latest inflation figures in the USA indicate a slowing price increase, providing Federal Reserve decision-makers with some leeway to respond to labor market weaknesses. The Personal Consumption Expenditures Price Index, excluding food and energy, rose by 0.2 percent in August, compared to a 0.3 percent increase in July. On an annual basis, however, the so-called core measure remains at an elevated level of 2.9 percent. Fed Chair Jerome Powell highlighted the cooling of the labor market as the reason for the first interest rate cut this year. Nonetheless, the central bank remains vigilant due to the ongoing economic uncertainties exacerbated by President Donald Trump's tariffs. Powell stated that there is currently no risk-free path and emphasized the complexity of monetary policy in the current situation. Numerous public appearances by Fed officials, including Powell himself, are scheduled for the coming week. New Fed Governor Stephen Miran, as well as other prominent members like Michelle Bowman, Mary Daly, and Alberto Musalem, will provide insights into the central bank's economic considerations. Economists will focus on inflation-adjusted consumer spending to assess consumer purchasing power and their contribution to economic growth. Analysts from Bloomberg Economics see initial signs of an economic recovery, in line with the growth and labor market revisions by Federal Open Market Committee (FOMC) participants. A significant indication could be the consumer spending in August, which remains high despite sluggish income growth. In addition to the economic figures from the USA, attention is also directed towards international developments, including updated GDP data from Canada and leading indicators for Asia and Europe.