The U.S. data pouring in supports Federal Reserve Chairman Jerome Powell’s forecast of solid economic growth and higher inflation. Still, economists remain confident that Powell will cut interest rates again next month as insurance against a global slowdown.

Retail sales in July rose by the most in four months, data showed on Thursday, suggesting the consumer was holding up ahead of the latest escalation in the U.S.-China trade war. While manufacturing output declined in the month, two regional Fed indexes for August came in higher than expected.

“Prudent risk management would argue for a cut in September because of the downside risks from trade policy and a slowing global economy,’’ said Ryan Sweet, head of monetary-policy research at Moody’s Analytics Inc. “The incoming data will likely factor into whether or not they go 50 or 25 basis points in September. Right now the data argue for 25.’’

Powell may give a hint of his thinking when he speaks on Aug. 23 at the annual central bankers retreat in Jackson Hole, Wyoming. The topic of his remarks is Challenges for Monetary Policy, according to the Fed’s public schedule updated on Thursday.

Investors have fully priced in another quarter point reduction when the Federal Open Market Committee meets on Sept. 17-18, according to pricing in federal funds futures contracts. Last month, the FOMC cut rates for the first time in more than a decade. Powell described the move as a “mid-cycle adjustment’’ and not the start of a long string of rate reductions.

Recession worries were underlined Wednesday when a key portion of the Treasury yield curve inverted -- meaning short-term rates were higher than long-term rates -- which has previously been an early recession warning. That segment of the curve, between two- and 10-year Treasuries, shifted back to slightly positive on Thursday but remains extremely flat.

“The Fed can’t just worry about domestic conditions,’’ said Ward McCarthy, chief financial economist at Jefferies. “After 30 years of globalization, the Fed can’t go off on its own and has to worry about global conditions. There is reasonable concern about the global economy and the health of financial markets.’’

Fed officials have consistently said they don’t see any imminent risk of recession, partly because consumers make up 70% of the U.S. economy and have continued to spend. St. Louis Fed President James Bullard said on Thursday that he was watching the markets and incoming data, but there was no need for an inter-meeting FOMC gathering.

“A couple of weeks one way or another probably doesn’t matter. What matters is that you are in the right zone for interest rates and that you are reacting appropriately to incoming data,’’ Bullard, a policy voter this year, told Fox Business network in an interview.

Inflation pressures may also be starting to build after being persistently low. Data released on Tuesday showed the annual gain in the core consumer price index, which excludes food and energy, hit a six-month high in July of 2.2%.

First « 1 2 » Next