It’s CPI week in the US, but the relevance of the BLS inflation update for Fed policy’s limited to the size of this month’s rate cut.

Last week’s labor market data was uniformly weak, which means an FOMC that was already 100% guaranteed to cut rates at this month’s policy meeting is now 1,000% guaranteed. So, even if the core price growth print overshoots on Thursday, it won’t deter a quarter-point reduction.

That’s not to suggest the inflation readout’s totally inconsequential. A warm read — and particularly evidence that the nascent uptick in services price growth continued into August — could rule out a 50bps cut on September 17. A cool read, on the other hand, could see the odds of a larger move rise.

Consensus is looking for 0.3% from the MoM core read. An in-line print would mark the second consecutive month during which underlying price growth ran a tenth faster than the pre-pandemic average.

The YoY measure’s drifting higher too, and when considered with disappointing labor market data, the threat of stagflation’s very real.

To be sure, team Trump (a card-carrying member of which will occupy a governor’s seat at this month’s Fed meeting) will almost surely insist on the merits of a 50bps cut in all but the worst of inflation outcomes this week. But notwithstanding their dissents in July, Chris Waller and Miki Bowman probably aren’t totally sold just yet on a half-point move, even considering the poor August jobs report.

It’s worth noting that Bowman dissented against the half-point cut at the September 2024 FOMC meeting. The political optics of dissenting in favor of a half-point reduction a year later, after being appointed to a key supervisory role by Trump, would be — how should I put this? — a bit dodgy.

Again, traders will be very keen for any sign that services inflation is in fact a problem again. Most macro watchers assumed inflation upside would be attributable to goods prices given the tariffs, but so far anyway, there’s not a lot of evidence to support that. There is, however, evidence of rekindled inflation in services categories.

It’s possible the CPI update could be overshadowed this week by the preliminary QCEW benchmarking exercise from the BLS. That’s due Tuesday morning, and it’ll probably find total payrolls revised lower by at least 500,000 for the reference period. As Waller remarked late last month in an address pointedly called “Let’s Get On With It,”

I estimate that monthly job creation will be reduced by an average of about 60,000 a month. That would mean that private-sector employment actually shrank, on average, in the past three months and that job creation earlier in the year was weaker than currently reported. I have heard the argument that declining labor supply due to lower immigration means that low jobs numbers aren’t as bad as they look and that the “breakeven” number for keeping the unemployment rate steady is declining. To those people, I would say: Yes, these estimates have been falling, but I haven’t heard anyone say the breakeven level is negative. Supply-side changes can’t account for the ugly jobs numbers of the past three months.

Suffice to say Chris is open to considering a 50bps cut. All he needs is an excuse, and the CES revisions could easily provide one. If he could bring around Miki, he’d be guaranteed a three-governor vote for an upsized move unless you think — and try not to laugh — Miran would push back, arguing for less easing.

All of that said, I still think the odds favor a “regular” 25bps cut even in the event jobs growth is in fact revised meaningfully lower and the inflation update’s benign.

Other than CPI and the establishment survey revisions, the US data docket’s pretty light. Traders will get PPI on Wednesday and the first read on University of Michigan sentiment Friday.