The stakes for next week's inflation data just got higher, now that Friday's jobs report introduced a new wrinkle to the interest rate outlook. Stocks were higher Friday, capping off a strong start to the month after the latest nonfarm payrolls report showed a surprising loss of jobs in July. Nonfarm payrolls fell by a seasonally adjusted 23,000 last month, while the unemployment rate edged lower to 4.1%, the Bureau of Labor Statistics reported.
The shocking report was nevertheless cheered by investors, who took the weakness in the labor market as a sign that the Federal Reserve won't hike rates in September. That fear had been growing on the Street in recent weeks, after three dissenters at the last central bank meeting in July voted to raise rates.
On Friday, the odds of the Fed raising rates by a quarter point at next month's meeting fell to 42%, from 55% the day before.
This ups the ante for next week's consumer and producer price index numbers for July. The Fed has been alert to the dangers of higher inflation and has expressed confidence in the labor market.
Economists aren't expecting much relief on the inflation front. The July consumer price index is expected to rise 3.4% compared to the same month a year ago, according to FactSet consensus estimates. That's a hair softer than the 3.5% increase in June, but still far above the Fed's 2% inflation target.
Investors hope for a softer inflation report that will let the Fed stay on hold in September.
This week’s key events include the release of the consumer price index, producer price index, and retail sales data.
