{"id":3297,"date":"2025-08-25T13:21:20","date_gmt":"2025-08-25T13:21:20","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/2025\/08\/25\/us-week-ahead-digesting-jackson-hole-with-more-stagflation-lite\/"},"modified":"2026-03-31T19:18:10","modified_gmt":"2026-03-31T19:18:10","slug":"us-week-ahead-digesting-jackson-hole-with-more-stagflation-lite","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/us-analysis\/us-week-ahead-digesting-jackson-hole-with-more-stagflation-lite\/","title":{"rendered":"US Week Ahead: Digesting Jackson Hole with more Stagflation Lite"},"content":{"rendered":"\n
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Federal Reserve Chair Powell\u2019s Jackson Hole speech left the door wide open for a September rate cut, but the Fed will have to traverse a range of data over the next month on both sides of its dual-mandate to be able to walk through it. While the odds of a rate cut next month are high, we aren\u2019t yet convinced it is a slam dunk. There are three more inflation releases and a series of labor market data including August\u2019s Nonfarm Payrolls that will likely continue to pull at both sides of the Fed\u2019s dual-mandate. This \u201cStagflation Lite\u201d environment will, in our view, continue to show slowing and below-trend growth coupled with uncomfortable and rising price pressures into year-end. Moreover, weighing on our minds even more than the Fed\u2019s first cut of this new normalization chapter is (i) how many cuts in total this central bank will ultimately be able to deliver, and (ii) how effective monetary policy will be at supporting an economy that is seeing supply side shocks to both labor (America needs workers, not jobs<\/a>) and inflation.<\/p>\n\n\n\n

Getting all the focus this week will be July\u2019s Personal Consumption Expenditure (PCE) <\/strong>deflator which lands Friday. That said, unlike the August CPI (9\/11) and PPI (9\/10) prints coming up, this week\u2019s PCE is a July data point and won\u2019t likely provide much new information for either central banks or market watchers relative to what we\u2019ve already gleaned from other prices data in the past month. We are projecting a reasonable +0.28% m\/m uptick in July\u2019s core PCE<\/strong> , which should be some initial relief following July\u2019s shocking Producer Price Prices surge of 0.9% m\/m. But, problematically, it is still premature to dismiss tariff impacts on consumer prices at this stage, even if PCE is well behaved. As we\u2019ve written about here<\/a> , there will be a lag between tariff-driven producer prices and consumer prices and we don\u2019t expect consumer prices to show more serious evidence of tariffs until late in Q3. More mechanically, medical care services prices have been largely flat, and the rise in airfares and securities commissions PPI has limited passthrough to PCE measures. RBC Economics continues to project<\/a> a re-acceleration in inflation heading into end-20265and, importantly, only partly off of the back of tariffs: services inflation and technical (however flawed) calculations of Owner\u2019s Equivalent Rent will keep inflation in a bad range. Put differently, the Fed won\u2019t be getting much of a green light for cuts from inflation data in the coming months \u2013 the central bank will have to lean more heavily on slowing job markets if it wants to lower rates.<\/p>\n\n\n\n

Other data to keep an eye on:<\/p>\n\n\n\n