The producer price numbers on Wednesday and the productivity number on Friday are the most important events we have ahead of the Fed meeting. There's still some uncertainty in the market about what the Fed will do and those numbers will be key to figuring that out.
I don't think the market is pricing in a big risk of a surprise.
This is great news on the inflation front. It will be very difficult for the economy to generate any sustained rise in core inflation with unit labor costs showing such a high degree of restraint.
From our standpoint, the change in language represents a small step toward an eventual rate hike.
Virtually everything else in the report was quite strong.
The negative impact associated with the energy shock will be more evident in the fourth quarter even though it hit in September.
While the dissent came as a surprise, we certainly wouldn't read it as evidence of any sort of a significant split on the FOMC.
There is obviously a lot of concern about the state of the housing market right now. One thing that caught a lot of people's attention was this nine-year high in unsold homes.
The resilience of the consumer really shines through in this data.
If the Fed has a bit of an itchy trigger finger, the ECI headline number gives them the excuse to go sooner rather than later. It does increase the odds of a tightening on Aug. 24.
