Tuesday, September 16, 2025
Ahead of today’s opening bell, new economic data should help color in the lines of what we expect the Fed will do at its next monetary policy meeting, which starts today and concludes with a new Fed funds rate tomorrow afternoon. The new figures out this morning are warmer than expected: will they matter to the Fed?
Retail Sales Double Expectations for August
The August print on
Retail Sales came in at +0.6% this morning, double the +0.3% expected and equalling the upwardly revised July read. This basically reverts to the baseline +0.6% on Retail Sales we were seeing in later 2024, before drastic policy shifts under the second Trump administration put sales numbers in flux.
Subtracting big-ticket auto sales, which can distort retail sales numbers on a month-by-month basis, we’re still up 30 basis points (bps) from expectations: +0.7%, 10 bps higher than the upwardly revised July headline, and the second-highest this year since +0.8% in June. Ex-autos and gas was also +0.7%, as was the Control number, which gets introduced up the food chain to other monthly economic data reports, like PCE.
Pre-market futures remain unbothered by this, but it is worth mentioning that these are somewhat inflationary data points, especially compared with expectations. Market participants are still sunning themselves on the premise that rate cuts are coming tomorrow and perhaps at the final two Fed meetings in October and December, respectively. But too many warmer-than-expected inflation reports may dampen those expectations.
Import Prices Swing to Positive Last Month
In more inflationary news, the
Import Price Index for August came in at +0.3% from an expected loss of -0.2%. This is the first back-to-back positive report on import prices since February. Ex-fuel, we see +0.2% — lower than the +0.3% analysts were looking for, and unchanged (0.0%) year over year.
On the other side of the coin,
Exports reached +0.3% for last month, and +3.4% year over year. This is the hottest we’ve seen so far in 2025; in fact, you’d have to go back to 2022 to see higher Export price levels. This is obviously a strong number, especially considering our ongoing global tariff tussle.
Outlook to Fed Meeting
A couple new developments greet the opening session of the two-day
Federal Open Market Committee (FOMC) meeting today: we’re now adding a Fed Governor, and we’ve not gotten rid of one accused of wrongdoing by the White House. Thus, we will have 12 voting members on interest rate levels tomorrow.
Chairman of the Presidential Council of Economic Advisors, Stephen Miran, has pressed pause on his official duties to take on the FOMC in this meeting. Miran had expressed in the past that interest rates are as much as 300 bps too high, so we can expect his vote to cut rates will come in higher — perhaps much higher — than the 25 bps largely expected from Fed Chair Jerome Powell & Co.
At the July FOMC meeting, for the first time in 30 years we saw more than one dissent from the ultimate Fed decision. For years, Kevin Warsh — considered one of the top candidates to take over for Powell as Fed Chair — would provide a counter-opinion to Fed Chairs Ben Bernanke and Janet Yellen. Last meeting, it was Fed Governors Christopher Waller — also a candidate for the top job — and Michelle Bowman who voted for a 25 bps rate cut.
Also, Fed Governor Lisa Cook — under fire from President Trump for alleged improprieties in her personal finances — has been allowed to remain in her position at the FOMC. She historically has voted alongside Powell, so we would expect a 25 bps cut from her as well tomorrow.
Some speculation had been fore a 50 bps cut tomorrow, but analysts had mostly traded that in for anticipation for three rate cuts by the end of the year. However, Powell’s demeanor at his press conference following the FOMC decision (2:30 pm ET Wednesday) will signal plenty as to whether the Fed Chair is on the same page as the stock market. Today’s warmer inflation metrics may cool his jets a bit.
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