Key Focus This Week “ All Eyes on Powell’s Jackson Hole Speech as Markets Watch for Rate Signals”

This week, market attention will turn to the American West as the annual Jackson Hole Economic Policy Symposium kicks off. Federal Reserve Chair Jerome Powell is expected to deliver a closely watched speech, joined by global central bankers, economists, and senior government officials. Investors will be listening carefully for any clues about the future direction of U.S. interest rates.

Expectations for a rate cut at the Fed’s September meeting have been rising. The Fed has not lowered rates since last December but is now facing growing pressure from President Trump and other administration officials to ease borrowing costs. BMO Senior Economist Jennifer Lee noted the Fed is in a tough spot — inflation is ticking higher, while the labor market appears weaker than previously thought.

Meanwhile, the minutes from the Fed’s July FOMC meeting will also be released this week, potentially shedding light on policymakers’ views on the economy and interest rates. The minutes may also provide insight into why two members dissented and voted in favor of a rate cut at that meeting.

Beyond central bank developments, markets will also digest U.S. housing data and weekly jobless claims, offering more insight into the current state of the economy.

On the corporate front, earnings from major retailers will be in focus as investors assess whether tariff pressures are starting to impact profit margins. Walmart is set to report on Thursday, having previously said it may raise prices to offset tariff-related costs. Home Depot is trying to maintain its pricing structure, with more details expected in Tuesday’s earnings report.Target will report on Wednesday, following earlier warnings that sales may fall short of projections. TJX, parent of T.J. Maxx, has also signaled that tariffs may weigh on revenues. Other retailers reporting this week include Lowe’s and Ross Stores, both of which may also offer insights into consumer strength amid inflation and trade-related headwinds.

Last Week’s Key Economic Data & News Recap

U.S. July Retail Sales Rise 0.5% MoM; Real Retail Sales Post 10th Consecutive Monthly Increase

July retail sales data showed broad-based improvement in consumer activity. Nominal retail sales rose by 0.5% MoM, slightly below expectations of 0.6%, but June’s figure was revised up from 0.6% to 0.9%. Excluding auto sales, July sales rose by 0.3%, in line with forecasts.

Since retail sales are reported in nominal terms, real (inflation-adjusted) retail sales provide a clearer picture of consumer purchasing power. Real retail sales rose 1.2% YoY in July, marking the 10th consecutive month of positive growth, indicating that consumer spending continues to expand despite inflation pressures.

U.S. July PPI Surges 0.9% MoM, Highest in Three Years; Rises 3.3% YoY

According to data released last Thursday by the U.S. Bureau of Labor Statistics, the Producer Price Index (PPI) rose 3.3% YoY in July, up sharply from 2.3% in June and well above the forecast of 2.5%, marking the highest level since February.

Monthly PPI jumped 0.9%, the largest gain since June 2022 (forecast: 0.2%; previous: 0.0%).

Core PPI (excluding food and energy) rose 3.7% YoY, the highest since February (forecast: 3.0%; previous: 2.6%), while the monthly core PPI also surged 0.9%, the biggest increase since April 2022 (forecast: 0.2%; previous: 0.0%).

U.S. Tariff Revenues Hit Record High in July, But Trump-Era Budget Deficit Widens Further
U.S. tariff revenues hit a record high in July, yet the increase was not enough to prevent a wider monthly budget deficit, highlighting ongoing fiscal challenges.

According to data released last Tuesday by the U.S. Treasury Department, customs tariff revenues reached $28 billion in July, up 273% YoY. However, after adjusting for calendar effects, the monthly budget deficit still reached $291 billion, a 10% increase from a year earlier.

As the current fiscal year approaches its end in September, the U.S. is heading toward another large annual budget deficit. As of July FY2025, the 10-month cumulative deficit reached $1.63 trillion. After calendar adjustments and excluding deferred tax receipts from FY2024, the deficit narrowed by 4% YoY.

Treasury Secretary Bessent previously projected tariff revenues may reach $300 billion for FY2025, with potential for further increases in 2026. However, most economists believe structural pressures, including interest payments on public debt and entitlement spending, remain the key challenges to U.S. fiscal sustainability.

U.S. July CPI Rises 2.7% YoY, Below Expectations; Core CPI Posts Highest Gain Since February
U.S. July CPI data suggests inflation pressure remains moderate, and the market’s concerns about a surge in inflation due to tariffs have not materialized. CPI rose 0.2% MoM, in line with forecasts. YoY CPI came in at 2.7%, slightly below expectations of 2.8%. Core CPI, however, rose to its highest level since February, driven mainly by rising services prices.

Despite the slight rebound in core inflation, the overall mild CPI data eased a major hurdle for the Federal Reserve to proceed with rate cuts.

U.S. Jobless Claims Edge Down, Continued Claims Remain at Highest Since 2021
Last week’s jobless claims data showed a slight decline, suggesting that while companies are slowing hiring, large-scale layoffs are not occurring.

According to data released Thursday by the U.S. Department of Labor, initial jobless claims for the week ending August 9 fell by 3,000 to 224,000, matching levels last seen in November 2021, and coming in lower than expectations (225,000) and the previous figure (226,000).

While economic uncertainty due to Trump’s tariff policies has led companies to reduce hiring efforts, the low initial claims indicate no significant rise in layoffs.