Looming Rate Cuts, Inflation, & More

Week in Review: Sep. 9-13

For most of this week, it looked like a sure bet that the Fed would cut rates by 0.25 percentage points at next week’s meeting. That changed last night (maybe due to some republican lawmakers coming out in favor of a cut? It’s not entirely clear…), and markets now put the odds of a 0.50 percentage point cut at about 40%.

I still think we’re heading for a 25 bp cut (Anirban agrees), but the Fed could—and should (Anirban also agrees)—go big next Wednesday with a 50 bp cut.

Monday

TSA Checkpoint Travel Numbers

Travel volumes have fallen off pretty sharply since Labor Day, according to TSA data, and are trending just 2-3% above 2023. That might be because Labor Day was a few days later in 2023, but this is something to watch.

Tuesday

Income and Poverty in the U.S.

Real (inflation adjusted) median household income increased 4% in 2023 and is almost back to the all-time high seen in 2019. The increases were nicely spread across the income distribution, with household income up 6.7% at the 10^th percentile.

The supplemental poverty rate (includes effects of government programs) increased to 12.9% in 2023, the highest rate since 2017. This comes just two years after the SPM fell to an incredibly low 7.8% in 2021. Put simply, pandemic relief and the expanded Child Tax Credit were effective at keeping families out of poverty.

NFIB Small Business Optimism Index

Small business owner optimism plummeted in August, and the uncertainty component of the index increased to the highest level since October 2020 (when, like now, we were also staring down the barrel of an election). Owners still cite inflation as their top issue.

Gas Prices & Diesel Prices

Gas prices fell below $3.40/gallon for the first time since February. Diesel prices fell below $3.60/gallon for the first time since October 2021.

Wednesday

Consumer Price Index