US Inflation To Edge Up As Powell Shifts On Job Market

A key US inflation gauge probably ticked higher last month, underscoring the challenge Federal Reserve Chair Jerome Powell and his colleagues face in balancing rising prices and mounting risks in a fragile job market.

A report Friday is forecast to show the personal consumption expenditures price index excluding food and energy — the Fed’s preferred measure of underlying inflation — rose 2.9% in July from a year ago. That would be fastest annual pace in five months. On a monthly basis, the so-called core measure is seen climbing 0.3% for a second month.

Speaking Friday at the Fed’s annual conference in Jackson Hole, Wyoming, Powell said there’s now a greater risk the job market could falter — although concerns over inflation persist. And while he said the effects of higher tariffs on prices are “now clearly visible,” it’s also reasonable to expect the impact will be short-lived.

Investors will monitor comments from Fed officials at public events in the coming week to gauge their appetite for a September rate cut. Governor Christopher Waller and regional Fed bank presidents John Williams, Lorie Logan and Tom Barkin are all scheduled to speak.

We expect the hottest reading since February. And if economic activity is gaining steam, firms may be able to pass through more tariff costs to consumers. That raises the risk that the upcoming CPI and jobs reports for August may not necessarily support a rate cut in September.”— Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins, economists. For full analysis, click here

Along with the July inflation data, Friday’s report is projected to show the biggest advance in household spending on goods and services since March. Economists will also look at the personal income data to gauge the ability of consumers to continue spending — a key driver of economic growth.

On Thursday, the US issues revised second-quarter gross domestic product data. The GDP report is forecast to show personal consumption picked up to a moderate pace after a sluggish start to 2025. 

Further north, Canada’s second-quarter GDP figures on Friday could show the negative effects of the trade war with the US — just as Ottawa extends a tariff olive branch to President Donald Trump. Bloomberg Economics sees output falling amid a worsening trade balance and destocking of inventories. The median estimate is for a 0.7% decline.

Elsewhere, India also reports GDP for the second quarter, South Korea and the Philippines set interest rates, and Germany’s Ifo report will hint at how businesses in Europe’s largest economy are responding to trade turmoil. 

It’s a big week for central banks and major data releases that will provide a first look at activity at the start of the year’s second half. 

The Reserve Bank of Australia on Tuesday releases minutes from its August policy meeting, when officials cut interest rates for the third time in the current cycle. The Bank of Korea is set to hold rates at 2.5% on Thursday, while the Philippines is likely to cut its overnight borrowing rate by 25 basis points to the lowest level in three years.

Other major releases include second-quarter GDP for India, where activity likely slowed to a 6.6% pace. China will report industrial profits for July after the prior month’s contraction. 

Inflation figures from Japan — including July producer prices for services and Tokyo CPI — will show whether price growth may nudge the Bank of Japan toward cutting rates. Japan’s jobless rate likely stayed at 2.5%. 

Trade and industrial production data across the region will provide a snapshot of conditions before higher US tariffs kicked in. It begins with Thailand’s trade activity on Monday, which is likely to show a slowdown from the breakneck pace of recent months. Singapore and Taiwan report industrial production on Tuesday. 

Hong Kong releases July trade figures, which have been running hot lately in the major transshipment hub. Data Thursday is likely to show India’s industrial production increased in July. 

Capping the week, South Korea releases industrial production, which is seen easing from June but accelerating on the year. Japan’s equivalent activity likely declined for the fourth time this year. The Philippines also reports trade figures on Friday.

Australia releases consumer prices for July, which are likely to show a pickup, while New Zealand has retail sales and business confidence reports on the agenda. 

Germany’s Ifo indicator will kick off the week with color on how businesses are reacting to Europe’s trade pact with the US. Despite many investors souring on the deal, which locked in tariffs of 15% on most goods, private-sector activity unexpectedly picked up in August as a three-year slump in manufacturing neared an end.

Ifo’s expectations index is expected to be a little weaker, with analysts predicting a pullback to 90.5 from 90.7.

An account of the European Central Bank’s July policy meeting is due on Thursday and will likely highlight the increasingly tricky path to another rate cut. In her first comments since the trade accord with President Donald Trump was reached, ECB chief Christine Lagarde said the levies were only a little worse than the base case, and far less damaging than the scenario that her economists had drawn up.

Barring major jolts to the economy, policymakers see little reason to lower borrowing costs when they meet in September, people familiar with the matter have told Bloomberg.

Friday brings inflation numbers from Germany, France and Spain, the first since tariffs rose. While fears of a persistent undershoot in consumer-price gains appear to have waned of late, the French reading is seen remaining below the ECB’s 2% target, at 0.9%. German and Spanish inflation is seen ticking up. 

Beyond Europe, Nigeria publishes GDP on Monday and Egypt sets interest rates on Thursday, with analysts expecting a cut to 23% from 24%. The same day will also see Zambia report inflation. Consumer-price figures are due on Friday from Uganda and Kenya, while Angola will provide an update on its economy’s performance.

Brazil posts mid-August inflation data and Tuesday’s month-on-month print may have declined. A negative monthly reading would push the annual rate down below 5% from mid-July’s 5.30% reading.

Messaging by Banco Central do Brasil has been consistent: wait until next year for any policy easing. Inflation in Brazil has been above target since late 2020 save for a single month in mid-2023. Analysts surveyed by BCB don’t see it back to target before 2029.

Attention then shifts to Mexico where Banco de Mexico on Friday will post its quarterly inflation report. 

Mexico watchers will be keen for policymakers’ take on the much slower-than-expected bi-weekly inflation data and downwardly revised second-quarter output data. Unpredictable US tariff policies cloud the country’s outlook, posing both upside and downside risks for Latin America’s No. 2 economy.

In Brazil, the government reports a number of debt metrics, which remain a concern for investors in the lead up to 2026 elections. Moody’s Ratings in June said it’s “difficult” to see improvements before then.

From Chile, six separate data releases are on tap, highlighted by copper production and unemployment. Job growth has been stagnant as the jobless rate held at 8.9% in June.

Mexico, Colombia and Brazil all report July labor market data in the coming week, with the headline readings expected to be at or near record lows.