I’m a broken record: The Fed should keep rates unchanged at the November policy meeting. But I’m also a realist: They probably won’t. They’ll probably cut. Again.

To be clear, a cut next week isn’t, strictly speaking, “crazy.” It’s not the worst idea I’ve ever heard, but that’s a pretty low bar, particularly in the context of an institution famous for bad ideas.

Thursday’s update on a crucial gauge of employment costs came up benign, as did the latest JOLTS release, so there’s no wage-price spiral. That’s another way of saying what Jerome Powell said in Jackson Hole and reiterated during remarks to reporters following last month’s 50bps cut: The labor market, even if it’s still adding a lot of jobs, isn’t an upside risk to inflation.

Inflation’s still an issue, though. There’s a fine line between fighting the last war and not finishing the job. Delineating that boundary is more art than science, and I’m no Michelangelo, but neither is Powell. I don’t think the Fed has any better idea than I do (or than you do) about where the boundary is, so in consideration of core inflation which is still running well above target and the fact that the Committee just cut by 50bps last month, the prudent thing to do is take a breath: If past is precedent, November will be followed immediately this year by December, and there’s a policy meeting in December at which the Fed can cut again (with the benefit of a new SEP) if they need to.

With that in mind, core PCE price growth was 0.3% in September, Thursday’s BEA update showed. That was the briskest monthly pace since March and wouldn’t you know it: The MoM prints for August and July were revised higher.

To be fair, the unrounded print was 0.25384%, and consensus did expect an uptick, so the release wasn’t all that hot, and it wasn’t a “surprise.” But it did underscore the extent to which this remains touch and go, albeit certainly not the harrowing, white-knuckle ride it was in 2022 and, at various intervals, in 2023. (H1 2024 was no cake walk on the inflation front either now that you mention it.)

On a YoY basis, core price growth in the US ran 2.7% in October. That sounds great in the post-pandemic context, but if you exclude 2021, 2022, 2023 and 2024, 2.7% is the hottest YoY core PCE reading since August of 2006, when Lehman was a going concern.

Thursday’s release showed nominal and real spending in the US rose 0.5% and 0.4% last month, respectively, both hotter than expected. Those robust reads were consistent with the upbeat personal consumption print from Wednesday’s advance read on Q3 GDP.

The saving rate — a subject of some debate recently — was 4.6% in September, down from August and the lowest since December of 2023, but still high enough (arguably) to fund more spending, particularly if the labor market holds up.

Speaking of the labor market, initial jobless claims printed just 216,000 for the week to October 26. That was 14,000 below estimates, the lowest since May and wholly inconsistent with any sort of recession narrative.

The four-week average moved down and do note: October 5’s anomalous surge will drop from that lookback next week.

Initial claims are 44,000 lower over the past three weeks, which is to say the entire early-October, weather-related spike is erased and then some. Continuing claims undershot too, for what it’s worth.

So, look — “here’s the deal,” as America’s figurehead executive might put it — the Fed can, and almost sure will, make a case for cutting rates next week. That case will be semi-plausible, but barring a very poor NFP release on Friday, it won’t be convincing in the context of an economy adding jobs and expanding at a 3% clip.

Ahead of the September FOMC meeting, I asked “Where’s the fire?” It was rhetorical. At the time, the labor market appeared to be decelerating rapidly, and as such I argued vociferously for the half-point move the Fed ultimately delivered. Now I might pose the same question: “Where’s the fire?” This time, I don’t see one. Unless it’s under the slow-burning coals keeping core price growth uncomfortably warm.