Comments based on information available as of 7:45am CT on 8/15/2025
Growth: Changing Priorities 
The Amazon-effect is reflected in the retail sales numbers with non-store retailers posting a strong 0.8% increase in sales in July. The four-day buying extravaganza prompted others like Target and Walmart to offer similar promotions. Not only was there a shuffling of spending, there was a strong increase in spending across a lot of categories. It is a little worrying to see the previously unstoppable food services and drinking places sales drop 0.4%, but car sales and the “control group” sales that feed into GDP calculations all made solid advances. Consumers are doing what they do best, consume, even if they’re changing their priorities about what and where to shop.
Inflation: A Lot To Swallow
Import prices rose more than expected in July. Year-to-date, import prices excluding fuel are up only 0.4%. Considering the trade-weighted dollar has dropped almost 7%, you’d expect import prices to also rise since a weaker dollar means foreign firms get less money in their local currencies. But most firms price to the market they sell in and absorb the currency fluctuations or hedge them. Foreign firms might not be eating tariff costs, but they’re eating dollar depreciation costs and that’s probably more than mouthful.
Policy: Fire In The Hole!
Next week, Chair Powell speaks at the Kansas City Fed’s conference in Jackson Hole, Wyoming. The conference this year is focused on “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.” I’m sure the papers presented will be about an aging population, artificial intelligence, robotics, and all sorts of other great things. They highlight—or maybe lowlight—will be on Friday when Chair Powell takes the podium. I tend to think of him as more reflecting the majority view of the Federal Open Market Committee than shaping the majority view. While there are more Fed officials talking about resuming rate cuts, Powell may try to temper expectations about when and how much they’ll cut.
Looking Ahead: Don’t Be Too Certain
According to the CME Fed Watch tool, traders are nearly certain that the Fed will cut at its September 16-17th meeting. I think they will, but I always get nervous when the market starts pricing in the near certainty of an event happening. It doesn’t leave a lot of room for surprises to the upside. If Chair Powell pushes back on the consensus view, people could just dismiss him as trying to provide more optionality to the Fed considering there’s a lot of data to go between now and the meeting. Or, he could introduce some volatility into the markets. Regardless, a little guardedness and a lot of diversification can help manage through however the markets interpret his comments.
