Weekly Update

Tuesday, August 18

• GDPNow update

• Industrial Production and Capacity Utilization Release

• Survey of Construction

Wednesday, August 19

• FOMC Minutes (July 28–29 meeting)

Thursday, August 20

• Initial Jobless Claims

Consumer Prices… Consumer prices rose 0.1 percent in July after falling 0.4 percent in June, the Bureau of Labor Statistics reported. Prices are up 3.4 percent from a year ago, down from 3.5 percent in June. Core CPI, which excludes food and energy, rose 0.2 percent in July and is up 2.5 percent over the past year, versus 2.6 percent in June. Shelter accounted for roughly two-thirds of the monthly increase, rising 0.1 percent, while energy prices fell 1.5 percent. As the chart below shows, both headline and core inflation remain above the Fed’s 2 percent target, with headline inflation well above where it bottomed out earlier this year, though both measures have edged lower over the past two months.

Producer Prices… The Producer Price Index for final demand was unchanged in July after edging down 0.1 percent in June, the Bureau of Labor Statistics reported. On an unadjusted basis, producer prices are up 4.7 percent from a year ago, the slowest year-over-year pace since March. A 0.2 percent rise in services and a 2.2 percent jump in construction prices offset a 0.7 percent drop in prices for final demand goods, led by a 5.7 percent decline in gasoline. As the chart below shows, producer price growth has climbed sharply since bottoming out in mid-2023, though the pace has eased over the past two months, down from a peak of 5.9 percent in May.

Hammack thinks it’s time to tighten… Cleveland Fed President Beth Hammack, speaking at a Dayton Area Chamber of Commerce breakfast on August 13, said the Fed should act now to bring inflation back to its 2 percent target rather than wait. She sees no tension in the dual mandate right now: unemployment has held between 4.1 and 4.3 percent over the past year, close to her estimate of maximum employment, while inflation has missed the Fed’s goal for more than five years and has drifted back above 3 percent after earlier progress. She argued policy isn’t restrictive today and that leaving rates where they are risks adding to price pressures she already sees as broad-based. Asked whether recent price increases are temporary or likely to stick, she pointed to five years of misses: the last two inflation reports came in better, she said, but she isn’t yet confident that holds.

• Standing Still as Inflation Runs Hot - Bryan Cutsinger

• One Month of Falling Prices Won’t Restore Price Stability - Bryan Cutsinger

• Warsh Wants the Federal Reserve to Rethink the Rules - Thomas L. Hogan

• Fed’s Task Force Should Fix What It Targets - Nicolas Cachanosky

• July Inflation Rises, But Weakening Labor Complicates Fed’s Choice - Nicolas Cachanosky