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- All Eyes On CPI As Rate Cuts Hang In The Balance
All Eyes On CPI As Rate Cuts Hang In The Balance
The Macro Institute's Weekly Economic Primer
The Macro Institute
August 11, 2025
In partnership with
This week’s economic calendar is oddly lopsided. Nothing arrives on Monday or Wednesday, but Friday is jampacked with releases. Surely that timing is just coincidence, but it makes you wonder why decision makers want to bunch all these reports into an August Friday?
We’ll be watching leading indicators like the NFIB small business survey, the Empire State Manufacturing Survey, and the preliminary August reading from the Michigan consumer sentiment survey. All three could potentially shed light on the inflation outlook.
Accordingly, the most consequential data will be July’s CPI and PPI. Recent PMIs show price pressures building further up the supply chain. As this week’s chart illustrates, it typically takes about nine months for rising ISM Prices Paid to show up in broader inflation measures. That relationship has been telling us that inflation surprises are more likely to be on the upside than the downside going forward.
The Macro Week In Review
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The Macro Week Ahead
🎰 All Bets Are On A 2025 Rate Cut Cycle
Markets are betting big on a Fed pivot. Last week’s light macro calendar kept traders fixated on the July payrolls shocker: just 73K jobs added vs. 100K expected. Normally, one weak jobs print doesn’t shake policy, but this one might be the catalyst hawks needed to turn dovish. The S&P 500 remains near record highs on the back of 50 bps of cuts priced in by year end.
Labor data is flashing softness. The ISM Services Employment fell to 46.4 in July, jobless claims are inching higher, and payroll growth is slowing. Still, the decline is gradual, which is normal late-cycle behavior. Structural forces, such as healthcare and professional services struggling to fill openings and 10,000 baby boomers hitting retirement age daily, are keeping labor tight. A lack of immigration (1.5M fewer foreign-born workers in five months) is tightening the screws further.
Markets expect the Fed to ease soon, but wage stickiness and tariff-driven price pressures have kept Core CPI elevated. So, even if the Fed does cut, the inflation floor is high.
📆 This Week Ahead
Inflation is the biggest threat to rate-cut hopes. CPI is released Tuesday with headline expected at 2.8% (up from 2.7%) and Core expected at 3.0% (+10 bps from last month). Tariffs are feeding through the supply chain, showing up in Prices Paid PMI data and recent PCE reports. The Fed sees this as a one-off shock, but if it seeps into wage growth, all bets are off.
Thursday’s PPI will give us another inflation check while Friday’s Empire Manufacturing will test tariff effects on orders, inventories, and hiring.
July’s Prices Paid hit 56, which is the highest since 2022. This suggests importers and consumers are footing the bill. Companies with pricing power will pass costs along, while those without pricing power will be forced to eat them. Rate cuts from 2024 will help cushion the blow, but earnings risk is creeping in.
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