August 21, 2025

QuickTakes

Waiting For The Chair To Speak

Stock and bond prices have been marking time over the past couple of weeks, waiting for Fed Chair Jerome Powell to speak tomorrow at 10 a.m. at the Jackson Hole Symposium. Meanwhile, today's batch of economic indicators supports our view that a Fed rate cut may not be warranted at the September 16-17 meeting of the FOMC if the other indicators released in the coming days also confirm that the economy doesn't need lower interest rates.

The July FOMC minutes released yesterday explained why all but two of the committee's members voted to leave the federal funds rate unchanged. We expect they will offer similar explanations for the same decision at their September meeting:

• "In their discussion of inflation, many participants observed that overall inflation remained somewhat above the Committee's 2 percent longer-run goal."
  
  
• "In their discussion of the labor market, participants observed that the unemployment rate remained low and that employment was at or near estimates of maximum employment. Several participants noted that the low and stable unemployment rate reflected a combination of low hiring and low layoffs."
  
  
• "In their discussion of financial stability, participants who commented noted vulnerabilities to the financial system that they assessed warranted monitoring. Several participants noted concerns about elevated asset valuation pressures."

Consider the following batch of indicators released today:

(1) The S&P Global flash purchasing managers' indexes were strong in August (chart). The M-PMI jumped significantly from 49.8 to 53.3, while the NM-PMI edged down from 55.7 to 55.4.

(2) August's regional business surveys conducted by the Federal Reserve Banks of New York and Philadelphia continue to suggest a rebound over 50.0 in the national M-PMI (chart).

The two business surveys show that both their prices-paid and prices-received indices remain elevated (chart). They both recently rose at the same time as the Trump administration imposed tariffs.

(3) Consumers' inflationary expectations remained high in the Consumer Sentiment Index survey in early August (chart).

(4) Layoffs remain low, as evidenced by initial unemployment claims (chart). Continuing claims suggest that it is taking longer for the unemployed to find jobs.

The number of short-term and long-term unemployed workers has been gradually rising over the past couple of years. This is especially true for teenagers and recent college graduates seeking jobs.

(5) The good news for the stock market is that bullish sentiment remains restrained (chart).

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