The labor market may screaming out of help after the recent string of weaker labor market including Thursday’s sharp jump in weekly jobless claims, but the Federal Reserve should steer clear of a jumbo rate cut at next week’s meeting as core inflation accelerates and data quality and political pressures mount, Scotiabank Economics said in a recent note.
“Upsizing next week amid political pressure and data quality issues would be dicey,” the report said, pointing to three straight months of rising core CPI inflation readings, including August’s 0.346% month-over-month print that narrowly missed 0.4%.
Scotiabank Economics flagged broadening inflation pressures across core services and some tariff-related goods, with core services inflation running hot at 0.3% month-over-month on average and core goods prices creeping higher. This trend challenges the view that inflation is easing, suggesting inflationary momentum persists beneath the surface.
Against the backdrop of these inflation dynamics, the Fed’s preferred core PCE measure is tracking between 0.2% and 0.3%, consistent with recent months but leaving little room for aggressive easing.
The latest CPI data released Thursday arrived on the heels of a jobless claims report for the week ended Sept. 6, showing claim applications surged to their highest in nearly four years. The weak data added to growing concerns about the labor market following last week’s soft monthly nonfarms payrolls report for August and the huge downward revision to the number of jobs created in the 12 months through March.
Source :
https://www.investing.com/news/stock-market-news/fed-jumbo-rate-cut-too-dicey-as-core-inflation-still-rising-scotiabank-4236052
