Every trader is locked in right now, and every desk is watching. The final inflation prints before the Fed’s September meeting are coming, and they’re coming in hot.
This week is loaded. We got six big U.S. releases, political drama in Europe, and an ECB rate decision all packed into five trading days, so the whole world is trying to price risk right now.
The main events start Tuesday with a 12-month revision of BLS jobs data, a key reset that may change how the labor market has been viewed. Then comes the August Producer Price Index on Wednesday, which will show if supply-side pressures are building again.
But the most critical data hit on Thursday, when the August Consumer Price Index drops alongside the OPEC monthly report.
And to end the week, we’re going to get the University of Michigan’s Consumer Sentiment and Inflation Expectations surveys on Friday, the final pieces of the puzzle before the Fed’s rate decision.
Fed watches inflation prints as traders prepare for a rate cut
The Fed is stuck in a strange spot. Inflation is still above 2%, but the economy is bleeding out slowly. August payrolls missed big, coming in over 33% below expectations. Unemployment jumped from 4.2% to 4.3%.
But that wasn’t due to layoffs. The labor force got bigger; 436,000 people entered the job market. So technically, more Americans are looking for jobs, not losing them.
The market saw that and immediately started betting on a rate cut. As of late Sunday, the CME FedWatch tool shows an 8% chance of a 50bps cut, something that had a 0% chance just one month ago. A 25bps cut is now priced in as nearly guaranteed.
This is where CPI and PPI become make-or-break. If both show progress, if prices are slowing, then the Fed gets the green light to ease up. But if not, Fed chair Jerome Powell might have to keep rates again, just as investors were starting to breathe, and Trump is finally getting what he wants.
Europe braces for chaos as ECB meets and France flails
While the Fed is calculating risk, Europe is juggling grenades. The European Central Bank meets Thursday and is expected to keep interest rates steady at 2%.
HSBC says Christine Lagarde will “maintain a dovish bias,” while the ECB itself said it wants to stay “deliberately uninformative about future interest rates decisions,” according to the minutes from its July meeting.
That approach makes sense because there’s a fire burning in France right now, with Prime Minister Francois Bayrou facing a confidence vote on Monday, and he’s almost certain to lose.
Bayrou’s minority government couldn’t rally enough support for the 2026 budget, which included €44 billion ($51.3 billion) in cuts aimed at shrinking France’s budget deficit from 5.8% of GDP in 2024 to 4.6% by 2026.
That still blows past EU limits.
If Bayrou’s government collapses, it’ll be France’s second government to fall in less than a year. Michel Barnier’s administration already crashed in December. And markets are already reacting. Last week, France’s 30-year bond yield rose before pulling back. On Monday morning, it was sitting at 4.35%, while the 10-year bond was at 3.43%, as Cryptopolitan just reported.
Traders are expecting Lagarde to get grilled on France during her press conference, but economists say she’ll likely dodge. No one at the ECB wants to touch French politics right now. It’s not just France either. Borrowing costs have gone up across major economies as investors try to figure out who’s next.
Meanwhile on Monday, we get German trade data. On Tuesday, it’s the French industrial production getting released. And Friday brings more heat, with German inflation numbers and UK GDP data hitting right before the weekend.
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Source: https://www.cryptopolitan.com/eyes-on-cpi-ppi-feds-final-inflation-check/
