Pressure Is Mounting On The Federal Reserve, Despite Stronger Than Expected Retail Sales

Fresh data out on Tuesday showed US retail sales came in higher than expected in August. Even once you strip out volatile items like autos, gas, and building supplies, the figures were solid.

An important way economists take the temperature of retail sales is by looking at the data on a rolling three- or six-month annualized basis. Doing that shows US retail sales are growing somewhere about 5-6%, a healthy clip by any stretch.

And sure, consumption growth will probably slow from here given the recent weakness in the jobs market, but healthy spending so far this quarter might’ve eased investors’ concerns about the US economy entering a downturn.

But it hasn’t.

Traders are still leaning towards a betting on an economy-boosting 0.5 percentage point interest rate cut from the Federal Reserve (the Fed) on Wednesday, and a “mere” 0.25 percentage point cut might be seen as a disappointment.

Politicians have started weighing in too, with some Democratic senators calling for an even bigger cut, and some Republicans suggesting a cut bigger than 0.25 percentage points could be politically motivated.

All eyes, then, on the Fed’s Wednesday announcement.