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    Important inflation reports this week expected to show prices still on the rise

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    Key inflation reports this week are expected to show that prices accelerated again in August, though not in a way that would keep the Federal Reserve from reducing its benchmark interest rate.
    Economists expect the reports to show increases of 0.3% across the board, including the headline all-items indexes as well as the critical core readings that exclude volatile food and energy prices.
    If those trends are apparent in the reports, central bank policymakers are expected to look through the increase and turn their attention more to the increasingly weak jobs market.

    Beef is prepared for a customer in a grocery store in Miami, Florida, on July 22, 2025.
    Joe Raedle | Getty Images

    Key inflation reports this week are expected to show that prices accelerated again in August, though not in a way that would keep the Federal Reserve from reducing its benchmark interest rate at a meeting next week.
    The Bureau of Labor Statistics is scheduled to release the producer price index for August on Wednesday, followed by the more closely watched consumer price index the next day.

    Economists expect the reports to show monthly increases of 0.3% across the board, including the headline all-items indexes as well as the critical core readings that exclude volatile food and energy prices, according to Dow Jones.
    If that is the case, it would push the annual headline CPI rate to 2.9%, the highest level since January, and further from the Fed’s 2% target and up 0.2 percentage points from July. On its face, that would seem to be a deterrent for the Fed to ease monetary policy when it meets next week.
    However, two factors will come into play. First, the core reading is predicted to be unchanged at 3.1%. Second, the increase in inflation is largely expected to come from tariff-sensitive goods rather than services prices that affect a much larger part of the $30 trillion U.S. economy.
    If those trends are apparent in the report, central bank policymakers are expected to look through the increase and turn their attention more to the increasingly weak jobs market that could use a boost from lower rates. Fed officials for now are mostly viewing tariffs as one-off price increases not likely to cause longer-lasting inflation.

    “In aggregate, it’s still hotter than the Fed would like to see,” said James Knightley, chief international economist at ING. “They’ll be looking at the broader picture. The U.S. is predominately a service sector economy.”

    President Donald Trump’s tariffs are likely to show up further in the inflation picture in the form of price increases for items such as autos, furniture and clothing, among other items.
    However, “aside from tariff effects, we expect underlying trend inflation to fall further, reflecting shrinking contributions from the housing rental and labor markets,” Goldman Sachs economists said in a note.
    That’s a double-edged sword for the economy, though, as consumers feel the pinch from falling housing values and wages that aren’t rising as quickly, providing another incentive for interest rate cuts.
    “When you get that combination, concerns about prices, concerns about incomes, concerns about wealth, those three things coming together are pretty toxic for the growth story,” Knightley said. “That’s starting to make the Fed more wary about where we’re heading.”
    Producer prices, which will report ahead of CPI, are considered an indicator of pipeline pressures. Despite rising 0.9% in July, the increase is expected to be tempered in August.

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    U.S. economy is worse than thought with 1.2 million fewer jobs — what that means for the Fed

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    With job growth tanking and the economy wobbling, pressure is on for the Federal Reserve to start lowering interest rates.
    Market expectations have shifted notably on rates as trouble signs have built around employment.

    A construction worker is shown on the job site at a multi-unit residential housing project in Encinitas, California, U.S., July 28, 2025.
    Mike Blake | Reuters

    With job growth tanking and the economy wobbling, pressure is on for the Federal Reserve to start lowering interest rates, with markets now expecting a cut at each of the three remaining meetings this year.
    The Bureau of Labor Statistics reported Tuesday that the economy added 911,000 fewer jobs than previously reported for the year preceding March 2025. Downward revisions since the cutoff date in that report suggest that the reduction in payroll growth has been actually around 1.2 million for the past 16 months.

    That’s a number sure to get the Federal Open Market Committee’s attention when it meets next week and could add fire to President Donald Trump’s repeated assertions that the central bank has been “too late” in making policy adjustments.
    “Had Fed officials had that data available in real time, policy rates would be lower today,” wrote Citigroup economist Andrew Hollenhorst, referencing the BLS “benchmark” payrolls revisions.
    Hollenhorst said the data actually “could justify” a jumbo half percentage point cut when the FOMC releases its decision Sept. 17. However, he expects Chair Jerome Powell “will have an easier time building consensus around a [quarter-point] rate cut next week, with signals that rate cuts will continue at upcoming meetings, including potentially in October.”

    Market expectations have shifted notably as trouble signs have built around employment.
    Traders now are not only pricing in a 100% chance that the Fed lowers by a quarter point next week, they also are allowing for a slight chance of a half-point reduction. They now firmly see cuts at each of the three remaining meetings, according to the CME Group’s FedWatch tool. The gauge uses prices on 30-day fed funds futures contracts to determine market-implied odds for rate moves. Just a week ago, markets were assigning only a modest chance for three cuts this year.

    Watching the numbers

    While the Fed is not bound by the market, it closely monitors rate expectations as part of its data dashboard.
    “The U.S. economy barely has any jobs right now and it’s been that way for a long time,” said Heather Long, now the chief economist at Navy Federal Credit Union and prior to that a Fed reporter for the Washington Post. “The Federal Reserve needs to cut interest rates in September, October and December, and the White House needs to quickly finalize a trade deal with China. Businesses aren’t going to invest and hire more people again until there is more certainty.”
    To be sure, Fed officials may feel they can be deliberate in their actions as the economic data are still muddy and subject to the changing winds from Trump’s tariffs.
    Moreover, there’s a chance that current data overstate the labor market’s troubles.
    For instance, Goldman Sachs disputed the benchmark payroll revisions, saying the total reduction based on the firm’s proprietary model and high-frequency data is more like 550,000, or a bit lower than the year before. The firm further said that the BLS revisions “provide limited information about the current state of the labor market” thought it acknowledged that conditions have “softened materially.”
    However, the report follows news that nonfarm payrolls rose just 22,000 in August. Moreover, a New York Fed survey found a record low in sentiment among workers who believe they could find another job if they lost their current position. Other surveys also have showed heightened worries.
    From the White House, the data reignited calls for rate cuts.
    “Much like the BLS has failed the American people, so has Jerome ‘Too Late’ Powell — who has officially run out of excuses and must cut the rates now,” White House press secretary Karoline Leavitt said in a statement.

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    Job growth revised down by 911,000 through March, signaling economy on shakier footing than realized

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    Annual revisions to nonfarm payrolls data for the year prior to March 2025 showed a drop of 911,000 from the initial estimate.
    The numbers, which are adjusted from data in the quarterly census and reflect updated information on business openings and closings, add to evidence that the employment picture is weakening.

    The labor market created far fewer jobs than previously thought, according to a Labor Department report Tuesday that added to concerns both about the health of the economy and the state of data collection.
    Annual revisions to nonfarm payrolls data for the year prior to March 2025 showed a drop of 911,000 from the initial estimates, according to a preliminary report from the Bureau of Labor Statistics. The total revision was on the high end of Wall Street expectations, which ranged from a low around 600,000 to as many as a million.

    The revisions were more than 50% higher than last year’s adjustment and the largest on record going back to 2002. On a monthly basis, they suggest average job growth of 76,000 less than initially reported.
    The numbers, which are adjusted from data in the quarterly census and reflect updated information on business openings and closings, add to evidence that the employment picture in the U.S. is weakening.
    Most of the time span for the report came before President Donald Trump took office, indicating the jobs picture was deteriorating before he began levying tariffs against U.S. trading partners.
    “The BLS’ preliminary benchmark revisions to nonfarm payrolls show a much weaker labor market over most of 2024 and early 2025 than previously estimated,” said Oren Klachkin, market economist at Nationwide Financial. “Importantly, the slower job creation implies income growth was also on a softer footing even prior to the recent rise in policy uncertainty and economic slowdown we’ve seen since the spring. This should give the Fed more impetus to restart its cutting cycle.”
    Tuesday’s revisions are not by themselves a reflection of current conditions as they go back as much as a year and a half. However, recent months’ data also has been pointing to a soft labor market. The summer months of June, July and August saw average payroll growth of just 29,000 per month, below the break-even level for keeping the unemployment rate steady.

    The largest markdowns came in leisure and hospitality (-176,000), professional and business services (-158,000) and retail trade (-126,200). Most sectors saw downward revisions, though transportation and warehousing and utilities had small gains. Almost all the revisions were confined to the private sector; government jobs were adjusted down by 31,000.
    Stocks reacted little to the release, though Treasury yields erased losses and turned higher.
    In addition to the economic concerns, the revisions also bring added heat to the BLS, which has been under fire from the White House for its data collection methods and results.
    Following a weak jobs report for July that featured substantial downward revisions, President Donald Trump fired then-BLS Commissioner Erika McEntarfer and nominated Heritage Foundation economist E.J. Antoni as her successor. However, the August payrolls count was actually lower than July’s and also featured revisions that took down the June total to a loss of 13,000 jobs, the first negative total since December 2020.
    “Today, the BLS released the largest downward revision on record proving that President Trump was right: Biden’s economy was a disaster and the BLS is broken,” White House press secretary Karoline Leavitt said in a statement. “This is exactly why we need new leadership to restore trust and confidence in the BLS’s data on behalf of the financial markets, businesses, policymakers, and families that rely on this data to make major decisions.”
    The benchmark revisions differ from the monthly adjustments in that they are far more encompassing.
    Where the monthly moves come from additional survey data that comes in to the BLS, the annual revisions stem from more comprehensive information from the Quarterly Census of Employment and Wages as well as tax data that essentially offers a full do-over on the data, rather than the incremental course corrections of the monthly reports.
    Moreover, the numbers announced Tuesday will face further revisions when the BLS releases the final benchmark figure in February 2026.
    For the previous benchmark revision, which encompassed the 12 months prior to March 2024, the initial total was 818,000 fewer jobs, later adjusted in February 2025 to 598,000, still the largest downward move since 2009.
    As a share of the 171 million member labor force, the revisions amount to 0.6%. However, the political and economic ramifications could be considerable.
    Additional signs of labor market weakness will add to the case that Trump has been pressing for Federal Reserve interest rate cuts.
    The White House statement added that Fed Chair Jerome Powell “has officially run out of excuses and must cut the rates now.”

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