While the shorter-term trend in core prices has picked up, the low yearly rate, along with the recent escalation in trade protectionism, can only spur the Fed to pull the easing trigger again on Sept. 18.

Sal Guatieri

Categorized in : Business

Spending will downshift to the slowest pace in a year in the firs... by Sal Guatieri

Spending will downshift to the slowest pace in a year in the first quarter.

U.S. inflation continues to drift gradually higher in response to a nearly fully employed economy, with some nudging from tariffs, the Fed has every reason to pull the rate trigger again in October.

The slow but steady upward pressure on inflation could tilt a majority of policymakers to lift their suggested interest rate forecast, possibly penciling in two additional moves in the second half of the year after almost certainly raising rates tomorrow.

All The Fed commentary to date has suggested they will proceed very patiently and very gradually in normalizing policy. Our sense is the Fed might be extra cautious moving on rates close to the election since they'll have to be seen as politically neutral, based on our view of how the economy will perform over the next six months and( considering) the U.S. is pretty close to full employment now... December is probably as good a time as any to move next.

The Fed will welcome the continued strength in consumer spending and the latest positive jobs report, but it's clearly in zero rush to tighten policy, these two reports might increase the odds of a September rate increase at the margin.

It adds to the steady drum-beat of solid indicators that suggest the economy is getting off to a much better start in the second half of the year and further increases the odds toward a September rate hike by the Fed.

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