Fed Faces Tough Choices
A Quiet Start, Then Big Inflation News
Monday was relatively quiet, but Tuesday brought fresh inflation data with the Consumer Price Index (CPI) for July. Inflation remains “sticky” — the headline number was up 0.2% month-over-month, while the annual rate stayed flat.
Core CPI, which strips out food and energy, rose 0.3% and climbed from 2.9% to 3.1% year-over-year. A major driver? Shelter costs — specifically Owner’s Equivalent of Rent — which makes up a full third of the CPI calculation. The problem is, most homeowners have no idea what their home would rent for unfurnished and without utilities, making this input questionable at best.
Wholesale Prices Surge
Thursday’s Producer Price Index (PPI) reading surprised markets. Expectations were for a modest 0.2% increase, but wholesale inflation came in at 0.9% — nearly 1% higher. This spike halted the recent downward trend in mortgage rates. It’s unclear if this was a one-off event or a sign of more persistent cost pressures, but tariffs may be playing a role.
Consumers Keep Spending
Friday’s retail sales report showed Americans are still spending, even with a weakening labor market. In July, only 19,000 jobs were created nationwide — not a sign of strength — yet consumer demand remains strong.
The Fed’s Dilemma
The Federal Reserve has two mandates:
- Price stability – keeping inflation in check.
- Stable employment – ensuring a healthy job market.
Right now, both are under pressure. Inflation is inching higher, and the labor market looks soft. The big test comes soon at the Fed’s annual meeting in Jackson Hole, where policymakers often set the tone for future monetary policy. All eyes will be on what they signal next.
Save the Date – Fall Fiesta!
Mark your calendars for Thursday, November 13th – our 11th Annual Fall Fiesta! This year’s event will feature incredible live music, great company, and a chance to give back. We’ll be raising money for Community Food Share, a Boulder County nonprofit fighting hunger.
Stay tuned for more details, but make sure you RSVP early. We can’t wait to see you there!
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