The Week Ahead: NFP to CPI: Your Move—and It Looks Like a Hold

The U.S. economy currently maintains full employment, rendering the labor mandate of the Federal Reserve secondary to inflation concerns. While the recent jobs report showed a positive surprise with an unemployment rate of 4.14%, slowing wage growth suggests the labor market is not a primary driver of inflationary pressure. Consequently, the upcoming Consumer Price Index (CPI) report is the critical data point for the September FOMC meeting. Rather than focusing on the standard core PCE, the Cleveland Fed’s trimmed mean and median price CPIs offer superior indicators of inflation trends by filtering out extreme price volatility and accounting for predictive food costs. Despite potential political pressure from President Trump and a slight hawkish shift from New York Fed President Williams, a hold on interest rates remains likely this month, contingent on favorable CPI data and the signaling of key voters like Governor Waller.