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The "data-dependent" Fed is fighting the data

Data: CME Group; Chart: Andrew Witherspoon/Axios

If Powell cuts U.S. overnight interest rates today, not only will he be fighting hawkish members of his rate-setting committee, but the supposedly data-dependent Fed will be fighting the data as well.

What's happening: Geopolitical tensions in the Middle East are rising and economic readings from China and the eurozone have continued to deteriorate since the Fed's last meeting — but U.S. data has been strong and even potentially inflationary.

  • The University of Michigan's consumer sentiment index rebounded in September after hitting a 3-year low in August.
  • U.S. retail sales rose 0.4% in August, doubling estimates from economists, after a strong 0.8% rise in July.
  • The core consumer price index, a measure of inflation excluding volatile food and energy items, rose 2.4% year over year, the biggest jump in more than a decade, according to St. Louis Fed data.
  • August's U.S. jobs report missed expectations for employment gains, but average hourly earnings increased by 0.4% for the month and 3.2% from a year earlier, both near their highest marks in a decade.

Now what? While most analysts and money managers say they still expect a rate cut, Fed fund futures prices show the market is growing less certain.

  • Traders went from seeing a 0% chance the Fed will hold rates steady at today's meeting a month ago to a near 50-50 shot on Tuesday.