US inflation data in the coming week may give the Federal Reserve mixed signals ahead of a potential third-straight jumbo interest-rate hike, with a broad measure of consumer prices likely to simmer down even as a gauge of underlying pressures accelerates.
The government’s report is expected to show an 8% increase in the overall consumer price index from the same month last year, down from 8.5% in July yet still historically elevated. Stripping out energy and food, the CPI is forecast to climb 6.1%, up from 5.9% in the year through July.
Tuesday’s figures, in conjunction with recent data showing healthy job growth, an elevated number of unfilled positions, and resilient household spending, will help shape Fed officials’ views on whether to press ahead with another 75 basis-point rate increase.
In recent speeches US central bankers stressed that high inflation will indeed require higher borrowing costs that slow demand, though they kept the door open on the size of a hike at the conclusion of their Sept. 20-21 meeting. Policy makers are now in a blackout period.
“We are in this for as long as it takes to get inflation down,” Fed Vice Chair Lael Brainard said at a conference on Wednesday. “Monetary policy will need to be restrictive for some time to provide confidence that inflation is moving down to target.”
In addition to the CPI, the US economic data calendar is heavy. Reports include producer prices, industrial production, regional manufacturing surveys and consumer sentiment.
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Figures on retail sales will hint at the pace of household demand for merchandise against a backdrop of elevated inflation, higher interest rates and a shift to spending on services and experiences. Economists project a solid gain in retail purchases excluding gasoline and motor vehicles.
